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The Rules for Day Trading

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  • The Rules for Day Trading

    If you want to start day trading then you need to know the rules of this type of trading. You must become familiar with these rules before you start. Generally the day trading includes the practice trading in stocks, shares, equity index futures, commodity futures and many more within that specific trading day. The involvement of various features like margin trading and electronic trading has created opportunities for the individuals participating. Those who take part in such trading are generally known as day traders. These traders are usually are well funded and well educated. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks.

    The Rules and Regulations for This Type of Trading

    There are some day traders who buy stocks, hold them for few hours and then finally sell them when the price goes high. All these phases happen on a single day of trading. They are generally called pattern day trader. These people are typically well-established in the field and have in-depth knowledge of the marketplace. The pattern day traders follow several rules set by the Securities and Exchange Commission (SEC). The pattern day traders must have a margin account for such trading. The margin account requires the depositing of a minimum amount of money. The amount set by the SEC is $25000. If you do not have such an account then you will not be able to trade. For trading with a cash account there are some rules set by the authority. You need to pay a security amount for cash trading. For the regular trading of shares you need to meet the minimum equity or margin calls. Therefore, you need to make your trading style clear when you are thinking about the day trading. The trading includes both loss and profit. So you should be prepared for any of them.

    When you are only thinking of making the advantages of the stock market then you can opt for options trading. You can choose your desired one from many options. In comparison with the day trading, they can provide you some greater return. The day trading involves various risks. It is because you have to buy and sell the stocks within a single day.

    Tax Rules for This Type of Trading

    Day trading works as an earning option. Therefore, you need to pay tax for that too. Generally the tax is paid to the federal Government when shares are traded. Those who have participated several times a week are called investors by the IRS. There are some ways available through which you can reduce the amount of tax. The expenses related to investment like computer and newsletter subscription are not included in the tax. You can definitely save some money by showing all these expenses.

    Day trading can occur in any marketplace, but the most common platform is the stock market or foreign-exchange market. It can bring some quick money for you. But you can become a victim of losing at any time. It is very difficult to succeed at trading without a concrete plan. Therefore, step in this business with proper knowledge.


    Article Source: http://EzineArticles.com/7666457

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    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."


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