Day Trading Tips, Day Trading Stocks, Day Trading Guide, Stock Trading, Stock Tips

Day Trading

May 27, 2009 by

Day trading is the process of buying and selling of a security or shares within a single trading day. This can take place in any marketplace. But this day trading is most commonly done the foreign-exchange (Forex) market and stock market. Here utilization of high amounts and short-term trading strategies are used to capitalize on small price movements in liquid stocks and currencies. The day trading can be thought as very easy– the business of taking up stocks with the intention of making profit up your positions before the closure of market place-it is basically a mug’s game.

Day traders are required to serve two important functions in the marketplace. Firstly, they keep the markets running efficiently and secondly, they provide much of the markets’ liquidity, specially in the stocks market. Day trading used to be the only preserve of financial firms, professional investors, analyzer and speculators. Banks or investment firm employees use to invest money in the day trade. This is mainly done by those professionals working as specialists either in equity investment or management of funds. But lately day trading is becoming a rage and increasingly popular among casual traders.

This can be attributed to the fact that there is advancement in technology, modification in legislation and the popularity and penetration of the Internet all over the world. Day traders buy and sell stocks all over the day in the hope that the stocks that they bought will climb or fall in value and they will earn quick profits. Day trading is also considered extremely risky and if you are naïve then it can result in substantial financial losses in a very short period of time.

Lets understand as how day trading works—–
For example, at 10:00 AM a day trader might buy 1000 shares of stock XYZ just as the price begins to rise on good news, then sell it at 10:04 AM when it’s up by some amount say Rs 5/-. The day trader makes 5000, minus commission. With today’s cheap commissions of 40paise or less per trade, that’s a quick 4500 bucks or better, excluding taxes.