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Factors That Affect Daily Trades

17 Dec, 2021

Factors That Affect Daily Trades

Day Trading is a term that is exciting and sounds thrilling too. Can everyone do daily trading? Yes! Anyone can trade daily. Simply open an account with SharePa in 7 minutes and you are ready to trade. However, the main question remains should you be on daily trades? Daily trades are a masterful skill that requires a carefully thought-out strategy and maybe a lucrative career.

What is day trading?

An individual or operator that buys stocks, currencies, futures, or options on the same day and sells them on the same trading day is called a day trader. It is a more short-term style of trading called intraday trading. Day Trading requires a trader to know which stock to trade in, when to enter into a trade and when to exit that trade. This is something a novice trader wouldn’t be able to execute. Day traders usually start daily trades after developing a good knowledge of the stock market, understanding the right tools, years of practice, and experience. Day trading, as you can see, is not an easy job. Several factors affect daily trades.

Factors that affect daily trades

1. Policies

Trade policies of governments, banking trade policies, economic policies – all these affect the daily trades. Especially, if you are trading across markets. When interest rates reduce or liquidity in the market increases, daily trade increases. The government or financial authorities of countries regulate the stock markets with interest rates and policies. Always keep yourself updated with news on economic policies.

2. Industry performance

Day traders are on the pulse of the market. They constantly evaluate company performance, industry performance and then decide on trading that stock for the day. From regulations in an industry to the growth of that industry and the top-performing companies. Are there new products being launched? Mergers in the pipeline? Are key members being added to the board? Companies’ financial results looking dicey? All these factors matter in day trading.

3. What do the analysts say?

While company news may be an important factor. Some key analysts evaluate market trends and map industry growth. These analyst ratings affect intraday trading. Has an analyst sent out feelers of a particular industry growing? It is thus speculated that companies and competitors in that industry are doing well, and buying increases. E.g., if analysts talk about the increasing trend of gaming, intraday traders begin looking at not only gaming companies but also entertainment companies, AR / VR hardware companies, and more to start buying stock.

4. News, blogs, trends, and social media

Social Media, blogs, and the news play a huge role in daily trades. Finance content creators are constantly putting out information on industry, trends, and strategies. Finance journalists share speculations on company performances and major news of market movement travels fast. Daily traders keep an eye out for these trends and trade accordingly in the market.

5. Futures Data

Intra Day traders always look at Futures data to track daily trades performance. Futures are a pre-commitment before the trading begins. These are traded before the stock market opens, giving day traders a good indication of market movement. Are the futures trading at high or lows? This gives traders an indication of what stocks to buy, which equities to exit, and the opportunity to hedge risks with futures.

6. Sentiment and Discipline

Day trading isn’t for everyone, and not for novices. Intraday traders have various strategies to trade daily to make short-term profits. This leaves no space for sentiment and emotions and that’s where discipline kicks in. An intraday trader relies on market volatility and thus needs a balanced mindset that affects daily trades.

7. Stock Liquidity

Higher liquidity in a particular stock, lets day traders move their position without altering the stock price. Higher the price, higher the chances of a buy position, and if the price moves down traders short-sell and make the profit. So how liquid the stock is, affects daily trades too.

8. Mid-day Trading

Once the open hour trading rush ends and all the news reports have kicked in, trading slows down around midday, typically noon. By this time the market has settled in and some stock prices have lost ground. This timing is an important factor affecting daily trades, as many intraday traders pick up stock at lesser prices. This marks an entry and exit point for many daily trades.

9. Opening hour of Trading

A lot happens from the close of the previous day to the opening of today’s markets. Major market news, change of events in a particular sector, economic reports, and more. Thus, the first hour of trading is highly active – with daily trading happening in the opening hour of the market. Traders enter or exit stock based on the events, driving high trading volumes. This opening hour trading can affect how trades operate throughout the day.

10. Demand and Supply

The concept of demand and supply is simple. When the demand for a particular stock is high and its supply is low, it trades at a higher price. If the stock is in surplus - where more traders are selling - and the demand is low, then the price of that stock trades at a much cheaper price. This is an important daily trade factor. Large groups of investors can sell out early and drive prices down.

Daily trading is a full-time job and a profession. It cannot be treated as a hobby, because traders invest hours of their time researching markets, companies and equities. Want to know more about the stock market? Read about the Top 5 Dos and Don'ts of Stock Market Investment.

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