Day Trading – An Outline

Day trading is regarded as the most vigorous trading practice. It is the buying and selling of financial instruments within a day so that at the closing of the market the trader have no open positions. Day traders by virtue of their trading practice are free from overnight risks and also benefit from not paying any margin interest (normally margin interest applies to trades having open overnight positions). Day trading is a risky practice where traders trade financial instruments for very small price differences and require substantial concentration and mental strength.

Day trading can be scalping or momentum trading. Scalping is the practice of buying and selling of any type of financial instrument in large quantities with in seconds. Scalpers are generally institutional traders or mutual finds who trades for minute price differences. Their profit mainly depends on the quantity of the trades done each day. Momentum trading is the practice of trading according to the market trend. Momentum traders are the normal individual traders looking to profit by buying when the market goes down and selling when the market goes up. Some other popular day trading strategies include rebate trading, range trading and news playing, etc.

The popularity of the day trading now a days comes from the electronic boom, which made market data and market access available to all one around the world. Today, most day trades trade their choice of market from their own home using a direct access trading platform, the trading system, installed on their computer. They are affiliates to specific day trading brokers who provide them the software and a trading account that qualify them to trade on respective markets. The broker collects margin from traders and deposits on financial market and also keep record of the trader’s trading activity and account details.

Real-time market information is the lifeline of day traders; any small delay can cause them huge loss. They get those through their trading platform, as graphs or tables. Many trading systems will have customizable alerts and triggers to notify trader about a major change and automate the trading practice according to the change. These trading systems also will have many technical analysis tools and market indicators to help traders in picking suitable stock, options, futures or currencies for trading. Remember that there are web-based trading platforms, mostly free, are available for trading, but only stand alone (direct access) systems are recommended for day trading.