Day trading is buying and selling within the same business day.
Traders that participate in day trading are called active traders or day traders. Technically, a day trader is a person who makes use of a brokerage firm to take advantage of that particular day’s market momentum.
Some of the more commonly day-traded are: stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures.
Day traders make profits by leveraging capital that take advantage of price movements in liquid stocks or indexes.
Day trading used to be a specialized skill exclusive to financial firms, professional investors and speculators. Many day traders were bank or investment firm employees who were specialists in equity investment and fund management. However, with the advent of electronic and margin trading, day trading has become popular among those who have internet and a few thousand bucks to spare.
The advent of internet trading means that day traders now include the average stay-at-home person. Today, there are 7 million people trading online in the USA.
Tips for successful day trading
1. Have high speed internet- trades happen quickly
2. Know your game: read the business section, subscribe to online newsletters, knowledge is key
3. Know your limits- know what you can afford to lose and play accordingly
4. Swing trade: start by holding trades for a day or 2
5. Pay the man: taxes- buy financial software that comes with your brokerage account to avoid confusion and frustration at tax time
Day trading is risky. 90% of day traders fail within the first three months. The odds aren’t great but like anything else if you stick with it, trade within your means, and become educated about the market, you might just be successful!