What is Day Trading?
Day traders buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock. They hope to lock in profits from the short moves a stock may make during a day. It is very risky, since it can also result in substantial losses in a very short period of time.
Popularized during the bull market of the late 1990s, day trading is the practice of buying and selling stocks over a very short period of time, typically one day. Once the domain of floor traders and investment banks, the availability of inexpensive computers and fast Internet access has brought day trading to the masses. Day trading strategies typically follow one of two approaches: beating the spread or attempting to catch short term trends. The spread is the difference between what is being offered for a stock (the bid) and the price being asked for the stock (the ask). Spread trading attempts to buy at the bid and sell at the ask, over and over again. Spread traders may make hundreds or even thousands of such trades a day. With the advent of spreads as low as one penny, spread trading has become much less profitable than it once was. Catching short term trends, or swing trading, generally involves following technical indicators to suggest when a trend may be starting or coming to
The act of buying and selling securities intra-day with the expectation of making fast profits within minutes to hours is known as day trading. Day traders come in all shapes and forms, using mechanical to systematic day trading systems, and can place anywhere from one to thousands of trades per day. Types of Day Traders Breakout Traders: Many day traders will trade momentum and focus on day trading breakouts above swing highs and swing lows while others will look to trade reversal setups after gaps. Reversal Traders: Counter-trend traders will look for signs that a stock is topping or bottoming out before they place a trade in the opposite direction. For example, reversal traders use tools such as the TICK, TICKI, Put Call Ratio, volume, etc. to anticipate a change in trend. Range Traders: Range traders find stocks that have been trading within support and resistance levels and buy when a stock hits support and sell when it hits resistance. Range traders will be most successful in mar
Day trading is the buying and selling of securities for a certain stock within a single day. The main goal of those who practice this type of trade is basically to be able to profit from the difference between prices for buying and selling. This type of trading serves two very critical functions in the industry. First, it keeps the markets efficiently running because of arbitrage as stock exchange basically thrives on buy and sell activities. Another function for this is that it usually provides so much liquidity in the stock market. What Makes Day Trading Risky? Although day trading may sound quite appealing at first, be warned that up to this day, the profit potential of this type of trading is still under debate among investors and brokers. And if you are new to the trading game, it is not advisable for you to gamble your investment as you may end up losing substantial amounts of money. Although day trading is not necessarily illegal nor is it unethical, most would agree that it is
