So You Want to Be A Day Trader
Let us begin with one of the most important issues - which market you intend to trade – Stock market, Futures market or Forex market. You should do research to assist you in deciding which market you are looking to trade. If you have dabbled in the markets before, this may help you to make up your mind. Are you more familiar with one market than another? Market trading hours vary so; this is another determining factor since you need to decide what hours you plan on being in front of your computer, uninterrupted.
Do you plan on trading during extended hours? This is a key decision you will need to make because you must find out what extended hour trading is available from your broker. If you are more interested in extended hour time frames not offered from your current broker, you will need to consider changing brokers in order to fill your trading needs. Remember that although the concept of trading during extended hours appears attractive, it brings with it a new set of problems such as, the traditional liquidity that the daily market offers. Instinet, Island and all the other ECNs don't have a common reporting structure as do NASDAQ and NYSE therefore, price and volume on one ECN might be different from that on another ECN. Remember that trades occurring during extended trading are NOT a part of the daily trading range posted. Typically, extended-hour trades must be done with limit orders.
Forex trading of currencies is on a 24 hour a day basis from Sunday afternoon ET to Friday afternoon ET. Through this 5+ day week of forex market activity, there is always at least one financial center open for business of forex trading. As some forex markets close for the night, others open somewhere else in the world. Since forex trading hours overlap, currencies are being traded continuously and in essence, forex trading practically never stops.
After you finalize the decision as to which market you will be trading, you can move onto your next step of your day trading career. Part of your decision on which market to trade should be based on the amount of trading capital you have available. Remember, trading capital should be discretionary income only. At no time should you even remotely consider using capital from your retirement fund, college fund or other funds previously specified for another specified purpose. Available trading capital may have a direct impact on your decision as to which market you intend to trade. Remember that, no matter which market you intend to trade, you should demo-trade for a period of time determined.