What is Day Trading?
Day trading means buying and selling stocks in a short amount of time, frequently intra-day, with the purpose of earning a small profit on each one. A day trader can turn these daily, small profits into a much larger profit over time.
To be successful, day traders pay close attention to the rapidly-changing fluctuations that happen in the stock market. They will look at which stocks are rising and falling throughout the day, general news that’s happening at the time, and earnings reports to help them maximize their profits. Essentially any event, company specific or macro-economic, that will moves prices directionally. They will also look for stocks with high liquidity, which means they are traded frequently and in large volumes.
Becoming familiar with a particular stock will also be helpful to a day trader. This allows them to understand how the stock moves throughout the day, how it affects the company, and how it compares to other stocks.
Day traders are not limited to buying and selling one or two stocks at a time; they can trade as many as they would like and can make hundreds of trades throughout the day. Some day traders may decide to hold their stock until the next day, as the best times for liquidity and volatility in the stock market are in the morning after 9:30 a.m. and at the end of the day before 4 p.m.
It’s important to understand that day trading is a high risk proposition which should only be undertaken by traders who can afford the inherent risk and reward associated with day trading.