Timing the Market as a Day Trader
Day traders can keep track of stock fundamentals just like long term investors do. Although his business is typically the short term fluctuations of a given stock timing the market as a day trader can lead to tidy profits. Timing the market as a day trader requires that the trader do fundamental analysis of the stocks that he commonly trades. In this case he is not looking for the short term profits that technical analysis offers. He is looking for the very solid gains that one gains when there is a big fundamental shift if the market for a given stock. Timing the market as a day trader can also work in trading commodities and when searching for profits among the changes in foreign currency rates.
Profiting from Fundamental Shifts as a Day Trader
Day traders are typically in the best position to make the most profit from big moves in the market. They are present at their trade station when the changes happen and when market inefficiency takes prices too high and too low before a price consensus evolves. For timing the market as a day trader to work the trader must do a bit of homework first. Here is where the day trader acts like a long term investor. He looks at the intrinsic value of a stock and its margin of safety. He educates himself about the market sector of the stock in question and the state of the economy. He searches for stocks that are unfairly priced, either too high or too low. Then the trader looks for cues that the market it catching on the hidden value or lack of value of the stock in question. This may come as an item in the news, a press release by the company, or the quarterly financial report of the company in question. When a trader has done his homework he is more likely to profit from the news in day trading.
Market Inefficiency Is Your Friend
Traders make their money when prices change. Knowing that a stock is likely to rise or fall in price in the near future is useful. Knowing how to profit from timing the market as a day trader is essential. Many traders use options in this regard. They purchase puts or calls on a stock. Puts give them the right to sell the stock at the contract price no matter how far the stock falls. Calls give them the right to buy the stock at the contract price no matter how high the stock goes up. Traders also use technical analysis tools such as Japanese candlestick signals in order to identify evolutions in market sentiment. Often times timing the market as a day trader requires a contrarian approach to day trading. The trader thinks clearly about the market and correctly identifies coming price changes no matter what the herd mentality is telling other traders. Then, when price changes are eminent he buys options, places his trades, sets his stops, and profits from timing the market as a day trader