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What is Day Trading?

In day trading you buy and sell stocks on the same trading day. Trading positions are usually closed before the market closes for 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. IF there is a lot of buying and selling done on a single day, they you might be imagining it to be a truly hectic day. In actual practice, this may not be so. In the course of a trading day, one may make several trades or you may just limit yourself to just one trade.

You may even just buy a stock on one day and sell it on the next day if you think that it is not profitable to sell it on the same day. You are not really restricted by law to finish off your trading activity the same day. There is a small brokerage fee that you need to pay if you take your trade to the next day.

In the usual practice, traders close their trading positions by the end of the same trading day. You may have a strategy on a particular day or you may have a general trading style and outlook, and both of these types of strategies determine the trading frequency for the say.

You will find traders who do very short or short-term trading. It only takes them a few minutes of seconds to finish off their trades. These are the trades who have a high frequency of trades during the day and they consist of high volume trades. Brokers reward them with big discounts on commissions because of the huge volume of their trades.

There are others, though, that do not want reduced brokerages. They focus on momentum or trends of the stock movement They are patient during their wait for a strong move which may occur 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. These people consider this practice as a golden rule which they follow religiously.

There are those who stay with the position even after the market closes so that their profits will run.

In day trading, the profits and losses come quickly. Although you might think that day trading is like gambling, there is a marked difference between the two. Day trading involves serious understanding of the process of trading while gambling does not allow you to make calculated moves or intelligent strategies.

If you want to learn more about day trading, click here for more info and tips.

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