Day Trading

In day trading, financial instruments are bought or sold during the same trading day. Here all positions are closed before the market closes for the day. A day trader buys and sells rapidly over a short span, taking advantage of the price swings. A day trader is also known as an active trader. Futures, stocks, options, and currencies are some of the common financial instruments which are traded in this manner.

How is Day Trading done?

At first only financial companies had access to stock exchanges. Hence, day trading was an option that was open only to them. But now due to the technological advancements, individual investors can also practice day trading.

A typical day trading session involves some simple steps. One needs to have access to a computer and Internet. The next step is to register yourself with an online broker. Investors can then start looking for real-time quotes online. This allows them to decide whether to buy or sell and settle the deals online with a click of the mouse.

Benefits of Day Trading

• In order to do day trading one only needs to invest in a computer and trading software, which is rather inexpensive.

   

• Day trading provides traders the flexibility of the timing of investing.

   

• A trader or investor has the freedom to adopt his/her own style, strategy and technique of investing, based on the trading objectives.

   

• Day traders need not worry about overnight uncertainties. Deals are settled during the business hours and closed positions.

   

Risks of Day Trading

• Day trading can be very stressful, since decisions are to be made quickly.

   

• When money is involved, then emotions often take over. Day traders may suffer as a result of fear or greed or ignorance

   

• Often investors make decisions hastily, resulting in increasing the risk.