In nur 10 Minuten Daytrading verstehen! (fĂĽr AnfĂ¤nger erklĂ¤rt)May 24, 2022
There are hundreds of promises to make quick money and get rich quick day trading on the internet. But what is day trading anyway? How does it work and what are the benefits and risks? We explain it to you in this video. Hello, my name is Thomas from "Finanzfluss" and we once received a request from the community to make a video about day trading. That is why today we are going to talk about what day trading is, how it works, what are the chances of success and what are the risks of day trading. Finally, we also consider whether it makes sense for a long-term investor to participate in day trading.
The topic of day trading, also known as trading for short, is generally a very emotional topic. On the one hand, you can find many so-called gurus on the internet who promise to have made a lot of money from day trading and want to show you how you can do it too. On the other hand, there are many branded victims to be found on the forums who have speculated with all their fortunes in day trading and, in the worst case, accumulated debts. For now, to skip any emotional discussion, let's look at a definition of what a day trader really is.
A day trader is a person who is engaged in day trading. Day trading is nothing more than short-term speculation on securities. The trader accumulates the so-called stock position within one trading day, which means that he buys stock and sells it again within the same day. This is where the word day trader comes from, because the trader only trades within a day and by the end of his trading day he has closed all positions, i.e. he has a 100% cash quota again. Since price fluctuations within a day are very small with relatively few exceptions, day traders have to use so-called leverage in order to make any profit in a day.
Price fluctuations within a day are relatively small compared to a yearly or monthly view. It is very rare for prices to go up or down. Therefore, day traders need to focus on making a profit even with small price fluctuations. For this purpose, day traders often use a lever, the so-called leverage. This is money borrowed from your broker or bank, which they use to try to "leverage" your profits. With the help of borrowed capital, day traders can achieve almost any leverage. You can, for example, B. Buy a share yourself and buy 100 shares on credit. This gives you the opportunity to profit from even very small price fluctuations during a day.
On the other hand, of course, they also run the risk of losing the borrowed money. Now that we know what leveraged trading is, let's take a look at the products and markets that most day traders trade. Most day traders, at least private ones, mainly trade derivatives. This means that they do not buy direct underlying assets, but derivatives such as e.g. B. Futures, options, binary options or CFDs. This has the advantage that such products can be used much better and less money has to be put on the table for this. There are also traders who only trade stocks, but this is less common because it requires more capital to make any move.
As we already explained to you in our derivatives video, derivatives are derived from an underlying asset. So what assets do day traders trade? As a rule, they trade stocks, but even more often they trade on the Forex market. The Forex market is the largest financial market in the world and operates in currency pairs. Yep. For example, if you hear that the euro has lost against the US dollar or that the British pound has gained against the yen, that is the currency market. Currency pairs are traded here. As mentioned, it is the largest and most efficient financial market and has the highest volume of transactions.
Now that we know what day traders trade, let's take a look at how they trade. A day trader has two options: he can go long or short. A long position means that you are betting on rising prices. Do you build e.g. For example, if you buy a long position on a stock, you buy that stock in the hope that it will go up in the future. If you build a short position, you bet on falling prices. The technique behind this is a bit more complicated, because to sell short you first sell an asset you don't already own and buy it at a later date.
This is a so called rental business. That certainly sounds a bit complicated, but it's just important to have heard the two terms well before. So how does a trader know if he should go long or short? There are different strategies for this. One strategy is called event trading. To do this, traders focus on special events that will happen throughout the day. For this Z. B. The published labor market data from the US and Germany count, you can count the economic forecasts that are published, but it may also be that a decision is made on the interest of a loan or that there are very unusual announcements, like p.
B. Renegotiation of the debt of Greece or Brexit. In the next step, the trader makes a guess as to how these numbers will turn out. Does he go e.g. For example, assuming a company is posting better sales figures than is generally expected, he'll take a long position because he expects prices to rise in the future. Does he walk like For example, if Apple expects iPhone sales to go down, and more than the general market thinks, it will short Apple. It is in the nature of things that he is not always right with these predictions. He just has to be right more often or have invested more in these decisions than in losses.
Now that we know how trading works, let's look at some of the reasons why so many people get excited about it. First of all, there is the dream of making quick money, that is, getting rich quick. Since large sums of money can change hands quickly, especially when trading, there is also the hope that at some point a large sum of money will enter your account. A second reason many people try to trade is that the barriers to entry are very low. Anyone can try to become a day trader: you don't need any special training, studies, or certificates.
He can simply open an account with a broker and start trading directly with his own money. However, this also carries the risk of underestimating these barriers to entry. Anyone who wants to start trading should be aware that he is playing against the biggest players in the financial market. Banks employ legions of merchants who have done it for a living, studied accordingly, have information you might not have, and can trade much faster than you can. Which brings us to the next point, namely the technical equipment. If you want to be a trader, you need a good technical team with a very fast internet connection because prices can fluctuate very quickly and if you miss a small price drop because your computer wasn't fast enough, your profits can be wiped out completely, do you?
TRUE? it may even have had losses. Other risks in private trading are that you z. B. may develop an addiction. This addiction can become similar to gambling addiction and lead to total ruin. Additionally, day trading produces a significant amount of transaction costs. Every time you buy and sell, there are transaction costs that need to be passed on to the broker. You have to generate these transaction costs in addition to offsetting your losses. There is also a point, which I just made, that they have very, very strong opponents, namely the largest investment banks in the world. Since there is no added value in trading, but money is always transferred back and forth, where there are winners there are also losers.
The money you lose in trading is in someone else's pocket, what you win someone else loses. According to a study published in Forbes magazine, which I also included in the link below in the description, 77% of private traders have losses. Of those who make a profit, the average annual profit is only $22,000.00. That's not a very impressive number for people looking to accumulate a large amount of wealth in a short amount of time. So if you are thinking of becoming a day trader, know that day trading is not a hobby, it is a real job. Consequently, you also have to undergo training and pay a lot of apprenticeship fees, because losses are part of the business.
Keep in mind that you are playing against the biggest banks who have educated people with a lot of experience and an informational and technological advantage: your opponents. If you want to broach the topic, there are several brokers that provide demo accounts that you can think of as the sample portfolio for stocks. You can test your skills here without real money. In the description you will find a link to such a demo account with a broker. If, like me, you want to accumulate a fortune in the long term, but more safely, more consistently, without sitting in front of the screen all the time and following every tick, then I cordially invite you to watch our videos. passive investing, which we have linked to here.
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