Day Trading

Day trading is the buying and selling of a financial instrument, (such as currencies, commodities, shares), within a single trading day.

This is done with the intention of making a short-term profit from the fluctuation of that particular instrument.

Day trading is most popular in the foreign exchange market (forex), and to a lesser extent with stocks and shares.

The reason why forex trading lends itself so well to day trading is due to its 24 hours a day, 5 days a week trading time.

Additionally, forex’s high liquidity and for retail traders, the low financial deposits required by brokers is a draw.

Consequently, in recent years there has been a growing online community in applying day trading methods, using technical analysis with regards to intraday swing trading.

Trendlines, candlestick patterns and technical indicators are especially popular.

Is Day Trading Right for You?

Market conditions determine when and how a trader should utilize which strategy or strategies.

Entry and exit points are critical in this form of trading, due to the relative high cost when paying broker spreads and commissions.

A day trader needs to be able to earn enough from one’s trade after the aforementioned costs, which can be especially difficult for very short-term day traders, known as scalpers.

These traders generally only stay in the market for a few seconds to a few minutes.

The key advantage to day trading compared to longer term trading boils down to the simple fact.

When day trading, traders are generally aware of the major news announcements, and can react to anything strange happening in the market.

By extension, a longer-term investor could for example, wake up the next day to find an important politician has said or done something unexpected.