When Is Day Trading Legal?

While calling day trading gambling may seem a little harsh, the reality is that it is.  Day traders are not investing in the stock market.  Investing in the stock markets entails researching stocks, following trends, and putting money in what are thought secure funds or companies in hopes of future productivity.  Day traders are not interested in what a company is doing this year, their debt, upcoming products, market capitalization, nothing.  Day traders are interested in only one thing: stock price movement.  Even just a few hundredths of a cent, both up or down, can mean a lot of money for the day traders.  Legal day trading, not pump and dump schemes and others, is complex but within the law and can be very profitable when done with skill and experience.

Legal Day Trading Practices

An investor legally trading stocks, the traders, typically stick to the off-market stocks such as those found in the pink sheets or the Over-the-Counter Bulletin Board (OCTBB).  These are commonly referred to as penny stocks. They are low cost, easy to buy and move, but are also mostly unregulated by the Securities and Exchange Commission (SEC).  While not all day traders play here, most due.  This is simply do to the fact that day traders need volume.  It is impractical to most investors to buy 100,000 shares of Google in the morning and then purge it in the afternoon.  The amounts are just too high to buy in are too high and the volumes still to low to be profitable when you are talking pennies on the dollar.  Most day traders buy thousands, hundreds of thousands, or even millions of low value penny stocks.  Then bases on news reports, market trends, or a whole host of other factors, they sell these stocks for pennies of profit on each.  With these amounts of volumes, pennies quickly add up.

Illegal Day Trading Practices

In addition to the many ways day traders make their money on market movements and stock share fluctuations, there are some who take the law and bend it or even break it.  Most of these include pump and dump schemes which falsely inflate stock prices temporarily.  Day traders in these practices take their money, meaning dump or sell their stocks, and other investors pay the price.

Related posts:

1. When Is Day Trading Illegal?
2. What Are Penny Stocks?
3. What Is A Penny Stock?
4. What Is Over The Counter Trading?
5. What Is Day Trading?