Although it is one of the most criticized trading approaches by big investors, day trading had slowly become an appropriate methodology this year. That happens mainly because markets had already taken a downturn and despite a multi-week recovery continuing right now, uncertainties for the months ahead continue to weigh heavily on the prospects. If you are not yet convinced that day trading with CFDs is not the best right now, stick to the end of this article, since we’ll talk about three reasons to take it into account.
For the first time in a century, the world has to deal with a global pandemic and most of the countries had proven to be unprepared in the face of such a danger. Until a vaccine will be developed, mitigation and NPI (non-pharmaceutical intervention) methods are the only tools available. Since many countries had imposed lockdowns, economic activity dropped to levels not seen since the Second World War. Market uncertainty spiked, which is obvious based on the gold trading activity, as well as other safe-haven assets. No one knows whether things will be good or bad in the mid to long-term horizon, favoring a short-term approach like day trading.
As confidence dropped, market volatility had spiked to levels not seen since the 2008 financial crisis. The Chicago volatility index (VIX) climbed above 80 and despite easing towards 30 recently, volatility is still high, if we compare it to previous averages. Increased volatility = high daily ranges, which means prices across all markets fluctuate so aggressively, traders can find a lot of trading opportunities during a day or even a trading session. At the same time, volatility means the market trend can change easily, leaving all gains under a question mark when a position is held for the next day.
Controlling risk better
When markets are fearful risk management is one of the main concerns for traders. Day trading implies traders know exactly what’s their risk in case any trade will turn out to be negative. This isn’t the right time to build a portfolio, ignore adding stop losses, and hoping that some assets will do good and compensate for other losses. Correlations are not the same and can change from one day to another. Day trading allows us to treat each trade individually, no matter what happens in other markets. That does not mean prices are not dependent on one another, but the decision-making process of a day trader should not rely on how portfolio investors operate.