What is Day Trading?
In day trading you buy and sell stocks on the same trading day. Most traders close their trading positions at the end of the trading day.
Day trading can be differentiated from after-hours trading where there is a continuation of trading activity even after the regular marketing hours when the stock exchange closes.
If you buy and sell stocks during the trading day, then you are a day trader. One might think that day traders are living very hectic lives. Although it may sound so hectic, most day traders do not really feel that way. There are traders who make a few trades a day and others even limit themselves to one trade.
There are some traders who buy stocks today, but if they think that it will not be profitable to sell it on the same trading day, then they sell it of the next day. There are no legal restrictions to finish off your trading activity the same day. You may have to pay some differential on brokerage if you carry your trade to the next day.
At the end of the trading day, traders usually close their trading positions. Your trading strategy for the day determines you trading frequency; it may also depend on your general trading style and outlook.
Short term trading is done by some traders. Some traders finish off their trades in a matter of minute or seconds. These are the trades who have a high frequency of trades during the day and they consist of high volume trades. They are the favorites of brokers who reward them with big discounts on commissions.
There are those who don’t mind these reduced brokerages. They focus on momentum or trends of the stock movement These traders patiently wait for a strong move which can happen during the trading day. These types of day traders make only a few trades.
Some traders prefer to sell their stocks before the close of the market day to avoid the risks arising out of the price gaps between the closing price on the day they bought a stock and its opening price the next day. Many follow this practice religiously treating it as their golden rule.
There are those who stay with the position even after the market closes so that their profits will run.
Day traders may quick profit and quick losses in a matter of minutes or at the end of the trading day. People might think that day trading and gambling are just the same, but they are not. In day trading you make strategies which you cannot do when gambling.