Comprehending the Volatility of the Day Trading Market

Thinking about day trading while staying connected for ten minutes a day is illusory. Day trading is a long-term job that requires hours and hours of study and analysis. Connect to Rockwell Trading on Facebook for more details.

Colonized by the English Protestants, North America quickly saw the expansion of trade and its extension, capitalism. The United States, the world’s largest economic power, is also the country of excessive disproportion. It was, therefore, natural that the first day traders should make their appearance here.

To understand the future, one must realize the past

The crisis of 1929, the crash of 1987 or the housing market crash of 2008 did not reverse trends. Each year, thousands of Americans leave their jobs to focus on day trading. It is estimated that about 150,000 individuals have made day-trading a full-time activity.

Of the 150,000, five thousand of the most active day-traders account for 15% of the US electronics market, the Nasdaq. The influence of individuals on the stock market is particularly observable in the volatility of values. Fifteen years ago, variations of a few percent were synonymous with strong rumors of redemption.

Now, some can climb or fall by several tens of percent without any real explanation. This volatility led portfolio managers to significantly increase their number of lines (different types of securities) to reduce the specific risks associated with each security.

Trading involves high volatility

High volatility is both the consequence and the cause of day-trading. While the emphasis in the 1960s was more on long-term investment, all speculation was on the short-term. The credence of these new investors: Why invest in a stock for a year to hope for a profitability of 50% while a daily profitability of 1% is equivalent to tripling the initial bet?

Because of the age of day trading in the United States, the tools available to individuals are much more advanced than what is available in Europe. This means that, in Europe, it is necessary to use the services of a financial intermediary whose primary function is to transmit orders to the market. US day traders will be able to access the stock markets directly via a trading account in a specialized company.