About Day Trading
The Advantages of Day Trading in Currencies Trading Currencies vs. Day Trading Stocks
Day trading suffered within the US in 2001, when new laws were passed that restricted the way stock traders could trade.
The law stated that day traders were required to have at least $25,000 in their accounts if they wanted to participate in day trading on an ongoing basis. This meant that many day traders were eliminated from the market, since many that were day trading, had been trading with less than $25,000.
Some traders argued that even though they had less than $25,000, they are still trading stocks, but the reality was that, these people were holding stocks for no more than a day or, in other words, short-term trading (BUT not day trading, per sec). So what can a trader do with less than $25,000 ? They could trade in currencies. You can day trade currencies with a lot less than $25,000. In fact, you can day trade with as little as a few hundred dollars by opening a Forex Mini Account. Furthermore, the currency (or forex) market is open 24 x7, every week !. - so a trader can day trade or short-term trade with an active stop, for most of the time. In the not too distant past, only banks and wealthy individuals and institutions could trade currencies, but now, thanks to the internet, a small investor can participate in currency trading (or forex trading). Some of the mayor advantages of currency trading over stock trading are: More flexible trading hours - Currency trading goes on, every hour of every day of every week, so you can day trade currencies all day long. The currency market does not close every day like the stock market. This basically allows the day trader to choose the hours that he is going to day trade with a greater degree of flexibility. Most small traders do their trading after their normal daytime work, even for just a few hours, each time, Flexible leverage - Day traders (with more than $25K in their accounts) should have an intraday margin of 4 to 1. This basically means that they can day trade $100,000 worth of stock with only $25,000. Short-term stock traders (those who hold stocks overnight) only have 2 to 1 margin. As a currency trader (whether day trading or short-term trading), you have 50 to 1 leverage or more. That means that I can day trade a very large amount of currencies with just $25,000. A big difference!.
Please Note:- that using leverage multiples the gains, as well as the losses of the underlying investment, so DO be extremely careful when using it. Less starting capital required - As mentioned before, if you want to start day trading but don't have $25,000, don't worry. A Forex Mini Account requires only a few hundred dollars to start. Less currencies to follow - There are only a handful of major currencies to trade. This simplifies things quite a bit. On the other hand, there are tens of thousands of stocks out there. How do you choose which stock you are going to trade? It should be much simpler to choose among a few currencies. More liquidity - Whatever we are day trading has to have enough volume to make it worth our while. Greater volume means that there are more people willing to buy and sell something at any given time. By some estimates, the currency market is more liquid than all the world stock markets put together.
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