Today's Stocks - Day Trading Stocks
Learn how to trade stocks better starting today for your future financial success ... We all know stocks are constantly on the move. Do you know which stocks are at the top right now? If you are trading stocks, this free, dynamically updating list of the 50 Top Trending Stocks can be extremely helpful. This complimentary list is updated every day and is based on MarketsClub's "Trade Triangle" and "Smart Scan" Technology.
Stock day-traders rapidly buy and sell stocks throughout the trading day in the hope their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Stock day trading is extremely risky and can result in substantial financial losses in a very short period of time.
Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
After-Hours Stock Trading: Understanding the Risks
The New York Stock Exchange and the NASDAQ Stock Market—the highest volume market centers in the U.S. today—have traditionally been open for business from 9:30 a.m. to 4:00 p.m. Eastern Time. Although trading outside that window—or "after-hours" trading—has occurred for some time, it used to be limited mostly limited to high net worth stock traders and investors or institutional investors.
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But that changed by the end of the last century. Some smaller stock exchanges now offer extended their hours. And, with more use of the ECN electronic communications network individual stock traders can easily access after-hours markets. Before you decide to trade the stock market after-hours, you need to educate yourself about differences between regular and extended trading hours, especially the trading risk.
You should consult your discount stock brokerage stock broker and read their customer risk disclosure documents. Check your stock broker's web site for applicable information on trading after-hours. As with stock trading during regular hours, the services offered by brokers during extended hours vary. You should therefore shop around to find the firm that best suits your trading needs.
While after-hours stock trading presents investing opportunities, there are also the following risks for those who want to participate:
Inability to See or Act Upon Quotes - Some stock firms only allow stock investors to view quotes from the one trading system the firm uses for after-hours trading. Check with your broker to see whether your firm's system will permit you to access other quotes on other ECNs. But remember that just because you can get quotes on another ECN does not necessary mean you will be able to trade based on those quotes. You need to ask your firm if it will route your order for execution to the other ECN. If you are limited to the quotes within one system, you may not be able to complete a trade, even with a willing investor, at a different trading system.
Lack of Liquidity - Liquidity refers to your ability to convert stock into cash. That ability depends on the existence of buyers and sellers and how easy it is to complete a trade. During regular trading hours, buyers and sellers of most stocks can trade readily with one another. During after-hours, there may be less trading volume for some stocks, making it more difficult to execute some of your trades. Some stocks may not trade at all during extended hours.
Larger Quote Spreads - Less trading activity could also mean wider spreads between the bid and ask prices. As a result, you may find it more difficult to get your order executed or to get as favorable a price as you could have during regular market hours.
Price Volatility - For stocks with limited trading activity, you may find greater price fluctuations than you would have seen during regular trading hours. News stories announced after-hours may have greater impacts on stock prices.
Uncertain Prices - The prices of some stocks traded during the after-hours session may not reflect the prices of those stocks during regular hours, either at the end of the regular trading session or upon the opening of regular trading the next business day.
Bias Toward Limit Orders - Many electronic trading systems currently accept only limit orders, where you must enter a price at which you would like your order executed. A limit order ensures you will not pay more than the price you entered or sell for less. If the market moves away from your price, your order will not be executed. Check with your broker to see whether orders not executed during the after-hours trading session will be cancelled or whether they will be automatically entered when regular trading hours begin. Similarly, find out if an order you placed during regular hours will carry over to after-hours trading.
Competition with Professional Traders - Many of the after-hours traders are professionals with large institutions, such as conservative mutual funds who normally have better access to more information than individual traders.
Computer Delays - As with online trading, you may encounter during after-hours delays or failures in getting your order executed, including orders to cancel or change your trades. For some after-hours trades, your order will be routed from your brokerage firm to an electronic trading system. If a computer problem exists at your firm, this may prevent or delay your order from reaching the system. If you encounter significant delays, you should call your broker to determine the extent of the problem and what you can to get your order executed.
Day Trading Stocks - Your Dollars at Risk
Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but running the risk of higher losses too.
While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.
Here are some of the facts that every investor should know about day trading:
Be prepared to suffer severe financial losses - Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it's clear: day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.
Day traders do not "invest" - Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.
Day trading is an extremely stressful and expensive full-time job - Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even.
Day traders depend heavily on borrowing money or buying stocks on margin - Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. A day trader should understand how margin works, how much time the have to meet margin calls, and the potential for getting in trades beyond their day-trading capacity.
Don't believe claims of easy profits - Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.
Watch out for "hot tips" and "expert advice" from newsletters and websites catering to day traders - Some websites have sought to profit from day traders by offering them hot tips and stock stock-picks for fees. Once again, don't believe any claims trumpeting the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations.
Remember that "educational" seminars, classes, and books about day trading may not be objective - Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading.
Check out day trading firms with your state securities regulator - Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator and at the same time ask if the firm has a record of problems with regulators or their customers.