What is Day trading

With the growth of technology, it’s no surprise really that “What is day trading?” is one of the top queries on Google when it comes to trading related terms. The reason behind this is quite apparent. There are a lot of traders out there that are interested in getting started and are searching for the first logical step.

By definition, day trading is a form of active trading where the trader buys and sells assets and securities multiple times within one trading session. The key idea and definition of day trading is having positions open and close within the same day. Day traders open and close a number of trades per day, not just one. Their strategies are focused on making profits from intraday price changes.

By avoiding holding on to positions overnight, day traders are avoiding some of the risks that are associated with those periods where they may not be able to close their position out when they want to. This could be due to liquidity or just due to the fact that the market they are trading may be closed and not available to trade at that particular time. Day traders prefer highly liquid assets, so they don’t risk being locked into a trade for this exact reason. They want to be able to get in and out exactly when they want to, even if it’s only after a gain or loss of just a couple of ticks. It could be the smallest movement, but that could be more than enough for a day trader to make the profits they need to deem the day a success.

The day trading trend

Despite the concept of day trading having been around for quite a while, it really didn’t become popular until the advent of the electronic age where we were all provided with the luxury of having an internet-based system where we can execute orders in milliseconds versus having to call into the pit and have someone execute for us.

As the name suggests, day trading involves closing positions before the day is done. The reason behind this is to keep the risk at a minimum, if at all possible. It’s really more so about not just mitigating the risk, but about maximizing control. By closing the position off while the trader is no longer monitoring it, the trader no longer has to worry about that particular position.

The day trader wants to close that position off before the night comes rolling around or whenever they plan on leaving their screen. Day traders, in general, tend to average from five to eight positions per day, somewhere between open and close. This shouldn’t be considered as a goal. It is just a statistical average.

How day trading is done

It’s also worth noting that day traders can operate on multiple trading venues simultaneously. The idea here is that they’re seeking to profit from the price movements of one or more assets by using the arbitrage that’s going on between those two venues, which means two different exchanges. If one is priced higher over on venue A and something’s priced a little bit lower at venue B, they may look to profit on some of these discrepancies. These are one of the tactics that day traders use.

As far as what day traders are trading, the Forex world still dominates the day trading market landscape, but futures are quickly coming up in second place.

There are many different considerations when day trading but the most important is getting a good education. The best way to start is by taking advantage of an online day trading course where you can learn how trade correctly.

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