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Day Trading

Day trading is when financial instruments are bought or sold during the same trading day. In day trading all positions are closed before the market closes for the day. A day trader buys and sells quickly over a short span, taking advantage of price swings. A day trader is also called an active trader. Stocks, options, currencies and futures are some of the common financial instruments that are traded in this way.

Initially only financial companies used to have access to stock exchanges. Hence, day trading was an option open to only them. With technological advancements, individual investors have also got the opportunity to practice day trading.

A typical day trading session involves a few simple steps. One must have access to a computer and the Internet. The next step is to get registered with an online broker. Investors can then begin looking for real-time quotes on the Internet. This would allow them to decide whether to buy or sell and settle the deals with the click of a mouse.

Benefits of Day Trading

Here are some benefits of day trading:

  • With some basic investment in a computer and trading software, one can practice day trading rather inexpensively.

  • Day trading offers traders the flexibility of the timing of investing.

  • A trader has the freedom to adopt his or her own style, strategy and technique of investing, based on trading objectives.

  • Day traders do not need to worry about overnight uncertainties. They settle their deals during the business hours and closed positions.
  • Risks of Day Trading

    The disadvantages of day trading include:

    • Day trading can be extremely stressful, since decisions need to be made quickly.

    • When money is involved, the emotions often take over. Day traders can suffer as a result of greed or fear.

    • The ‘smart money,’ or institutional investors, can often move markets in ways that can catch retail investors – such as day traders - unawares

    • Those who get emotional while day trading can suffer losses as a result of their greed or ignorance.

    • Often investors make decisions hastily, which increases the risk.

    There are three types of day trading – trend trade (buying shares when prices are moving upwards); counter trade (selling shares when prices are rising) and ranging trade (when trades move in a back and forth manner between two prices). While trend trade moves in the same direction as the price, counter trade is against it. Ranging trades are executed when there is a sideways movement in the market.

    Top 6 tips for successful day trading

    Top 6 tips for successful day trading


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