What Is Day Trading?

A day trader is a relatively new type of investor. Day trading stocks has been around for several decades but really only arrived into the homes of the average investor in recent years. Day trading is what it sounds like: trading stocks in a given trading day, and usually closing out your stocks, meaning selling off in the same day. Day traders are considered active traders for the reason that they actively sell and trade stocks on a daily basis. Day trading stocks is not a typical investment strategy. The typical investor thinks long term and buys stocks and fund shares based on what they hope will be future and steady returns. In day trading one does not worry about what Company X will do in the next quarter. Day traders care only about what that stock will do today, meaning will it increase a few cents or percentage points now, or later. In the world of stock market investment, many involved in day trading stocks are seen as cheaters or gamblers. In a sense they are as day trading is not based on analyzing stocks or making long term investments for the future. In fact the company or fund being invested in is irrelevant to the day trader, only where that stock will move today is.

Active traders need all the tools they can to help facilitate their trading. Day traders can make millions of dollars a year only day trading. This seemingly easy money can be lost or gained in a single day very easily. To get started in day trading, many active traders invest in several computers, trading software to assist them, and a strong high-bandwidth internet connection. Additionally day traders will need a direct access online stock broker. With direct access there is no retail trader, simply an ECN (Electronic Communication Network) to execute multiple trades in single day. Many day traders make thousands of trades a day and therefore utilize discount online brokers who often, once someone is trading several thousand stock transactions each day, offer prices per trade as low as $.004 each.

The techniques and tricks utilized each day by day traders are too long to list. They range from scalping, where one makes their profit by presetting buy amounts a few tenths of a cent over sell, to buying on margins, short selling, and more. Many day traders simply follow the news and buy and sell based on which companies are getting pushed up or down based on positive or negative news stories regarding a company´s performance.

What Is Day Trading?

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