TMCnet Feature
October 14, 2021

High-Frequency Trading: This Is How to Get Started

Trading is becoming more and more popular. The main reason for that may be the fact that nowadays, you can trade online. That makes trading a lot easier. Also, many people are looking for ways to lucratively invest their money, as low interest rates have turned down the appeal of traditional deposits with the bank.

Buy-and-hold is possibly the most common strategy when it comes to buying shares. But the ones, who really want to enlarge their capital, often prefer a short investment horizon. High-frequency trading - or day trading - has become a big thing in the financial sector. But the market poses not only chances, but also risks. That's why prospective high-frequency traders should bear a few things in mind.

How to Make Money with High-Frequency Trading

Investors, who are really successful, can even earn extra money for their performance on trading platforms like Leeloo. In order to find out what exactly Leeloo is and how it works, visit the Leeloo Trading review. But in order to obtain enough expertise to succeed as a performance-paid trader, it's important to learn about the general techniques for traders and to understand why day trading can be a great way to make money.

What Is Day Trading?

Day Trading is also referred to as intraday trading. That means, an investor buys shares or coins of a cryptocurrency and sells them again on the very same day. But why exactly can high-frequency trading help you benefit from the stock market?

Stock exchange values are volatile. That means, they fluctuate not only long-term, but also during the single trading days. Day Traders take advantage of the small fluctuations that take place each day by buying when the price is low and selling once it has risen. That way, they can generate steady returns and enlarge their investment capital.

The time span between the purchase of stock values and their resale can vary between a few hours and a few seconds. If a trader takes advantage of the smallest and most short-term fluctuations, it's called scalping. The latter requires a lot of time and concentration, as even the smallest distractions can lead to financial loss. Beginners should choose trading styles that are less demanding.

How to Start Day Trading

In order to start day trading stock, cryptocurrencies or NFTs, investors should learn about the stock market and economic correlations before actually investing real money. When trading volatile stock exchange values, it's crucial to understand how the market works and which factors stock market trends depend on.

The next step is finding a legit online broker. Prospective traders should always compare providers and make sure to find one with wide-ranging services and with low costs and fees. As day traders constantly buy and sell values, they should pick an online broker, which doesn’t charge them with exorbitantly high transaction costs and broker's fees.

The Right Trading Strategy

If traders want to benefit from short-term fluctuations, they should make sure to use a reliable trading strategy. It is not advisable to trade following your gut feeling: It could confuse you and lead you to panic sales. Strictly following a trading strategy can be challenging, because keeping a cool head is essential for smart trading decisions.

In order to become acquainted with a strategy, it needs a lot of practice. Some brokers offer demo portfolios with play money for their customers. It can be a good idea to take advantage of that offer and to try out the most interesting strategies. Beginners should not choose a complicated one, though, and therefore stay away from the Fibonacci trading strategy or from the Bollinger Bands strategy. Instead, trend-tracking or trend reversal can be good alternatives.

Beware of the Risk

High fluctuation always favors risks, too. It's important to be aware of the possible financial loss. Therefore, traders should always settle a budget for trading and not touch the money they need in order to cover their expenses.

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