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Forex Stock Exchange Forum  » Forex and Stock Trading English Forum » Forex School » Truth About Day Trading

Truth About Day Trading

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1attention Truth About Day Trading Mon Jul 25, 2016 9:27 pm



Day trading sounds pretty glamorous. Wake up, place a few trades, earn some money and go about the rest of your day doing what you want to be doing. However, have you every wondered if that was too good to be true? This infographic sheds light on the what is truly like to be a day trader.

The most compelling point for me was this: 25% of traders that started out losing money began to be profitable after a 3-5 month learning curve with training. This makes so much sense to me. I find it completely baffling that first-time traders think they can figure it out buy themselves. The school of hard-knocks is always more expensive then real education.

Why should you care about the 200 day moving average? If you have been involved in any financial markets, whether actively trading or simply investing, you have likely heard of the infamous 200 day moving average. This moving average is simply a line on a chart that plots the average price over 200 trading days.

GREAT… Now how might this be useful?
The 200 day moving average provides both traders and investors a clear picture on the overall trend within a market. Markets that are trading above their 200 day moving average (MA) are said to be trending higher while markets trading below their 200 day MA are said to be trending lower.

Although there are various ways one can potentially use the 200 day MA, one of the most common methods is to go long stocks above their 200-day MA and go short stocks below their 200 day MA.

Here is an example:
Stock ABC is trading at $40 per share. The stock’s 200-day MA is at $38 per share. Since the stock price is above the 200 day MA, an investor may potentially look for a long entry on a smaller timeframe.

On the other hand, if stock ABC is trading at $40 per share and the 200 day MA is at $42 per share, then the investor may potentially look for a short position on a smaller timeframe.

The 200 day Moving Average is Good, but Not Perfect. Given the large timeframe involved, this moving average may be most useful to longer-term investors. While it may potentially help keep one on the right side of the prevailing trend, used alone it will likely yield poor results.

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