| Day trading refers to the practice of
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| | discipline, risk or money management[3].
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| buying and selling financial instruments
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| | The common use of buying on margin (using
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| within the same trading day such that all
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| | borrowed funds) amplifies gains and
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| positions will usually (not necessarily
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| | losses, such that substantial losses or
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| always) be closed before the market close
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| | gains can occur in a very short period of
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| of the trading day. Traders performing
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| | time. In addition, a broker usually allow
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| day trading are called day traders.
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| | more margins for daytraders. Where
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| Some of the more commonly day-traded
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| | overnight margin required to hold a stock
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| financial instruments are stocks, stock
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| | position is normally 50% of the stock's
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| options, currencies, and a host of
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| | value, many brokers allow pattern day
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| futures contracts such as equity index
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| | trader accounts to use levels as low as
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| futures, interest rate futures, and
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| | 25% for intraday purchases. That means
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| commodity futures.
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| | even a day trader with the minimum
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| Trade frequency
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| | $25,000 in his account can buy $100,000
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| Although collectively called day trading,
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| | worth of stock during the day, as long as
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| there are many sub-trading styles within
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| | half of those positions are exited before
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| the whole "day trading" tree. A day
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| | the market close. Thus a day trader has
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| trader is not necessarily very active.
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| | to admit mistakes quickly and cut losses
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| Depending on one's trading strategy, it
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| | fast when the market goes against a
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| may range from several to even a hundred
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| | position. Even when a position is in
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| orders a day.
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| | profit the day-trader needs to be careful
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| Some day traders focus on very short or
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| | since the profit plus any dividend has to
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| short-term trading, in which a trade may
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| | offset the transaction costs and the
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| last seconds to a few minutes. They buy
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| | interest on the margin[4].
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| and sell for many times, making very high
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| | It is commonly stated that 80-90% of day
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| trading volume daily and receiving very
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| | traders lose money. An analysis of the
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| deep discounts from the brokerage.
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| | Taiwanese stock market suggests that
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| Some day traders focus on momentum or
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| | "less than 20% of day traders earn
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| trend only. They are more patient and
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| | profits net of transaction costs".
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| wait for a ride on the strong move which
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| | Popularity
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| may occur on that day. They make far
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| | Day trading used to be the preserve of
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| fewer trades than the abovesaid day
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| | financial firms, professionals, some
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| traders.
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| | savvy private investors and speculators.
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| Overnight position
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| | Many day traders are professional bank or
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| Traditionally it is suggested day traders
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| | investment firms employees working as
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| should always settle their positions
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| | specialists in equity investment and fund
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| before the market close of the trading
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| | management.
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| day to avoid the risk of price gaps
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| | One of the first steps made day trading
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| (price differences between previous close
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| | of shares potentially more profitable is
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| and next day open that it looks like a
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| | to change commission scheme. In 1975, the
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| "gap" between price activities) at the
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| | Securities and Exchange Commission made
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| open. Some day traders consider this as a
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| | fixed commissions illegal, giving rise to
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| golden rule which have to stick with
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| | discount brokers offering much reduced
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| firmly and strictly all the time.
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| | commission rates.
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| It is thought this rule goes against
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| | Electronic developments further helped to
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| traditional market wisdom, "let the
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| | promote day trading. One important step
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| profit run". Prematurely closing a
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| | in facilitating day trading was,
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| position is equal to not letting your
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| | therefore, the founding in 1971 of NASDAQ
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| profits run. Thus some day traders
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| | -- a virtual stock exchange on which
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| advocate it is okay to stay with a
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| | orders were transmitted electronically.
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| position after the market close as long
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| | Moving from paper share certificates and
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| as it is still in a winning position with
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| | written share registers to
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| the trend on your side.
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| | "dematerialized" shares, computerized
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| Some day traders borrow money to day
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| | trading and registration required not
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| trade. Since margin interests are
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| | only extensive changes to legislation but
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| typically only charged on overnight
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| | also the development of the necessary
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| balances, the extra costs discourage them
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| | technology: online and real time systems
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| to hold positions overnight.
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| | rather than batch; electronic
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| Profit and Risk
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| | communications rather than the postal
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| Due to the nature of leverage and rapid
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| | service, telex or the physical shipment
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| returns, day trading can be extremely
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| | of computer tapes; the development of
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| profitable and high-risk profile traders
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| | secure cryptographic algorithms etc. All
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| can generate huge percentage returns.
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| | have been materialized.
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| Some day traders can manage to earn
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| | Day trading has become increasingly
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| millions per year solely by day
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| | popular among casual traders due to the
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| trading.[2]
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| | advance in technology, new facilities
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| Nevertheless day trading can become very
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| | offered cheaply, and the popularity of
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| risky, especially if one has poor
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| | the Internet.
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