All About Day Trading
April 17th, 2009
What is day trading?
Day Trading is the act of buying and selling securities intra-day with the expectation of making fast profits within minutes to hours. Popularized during the bull market of the late 1990s, day trading is the practice of buying and selling stocks over a very short period of time, typically one day. Once the domain of floor traders and investment banks, the availability of inexpensive computers and fast Internet access has brought day trading to the masses.
Day traders come in all shapes and forms, using mechanical to systematic day trading systems, and can place anywhere from one to thousands of trades per day.
Day trading strategies typically follow one of two approaches: beating the spread or attempting to catch short term trends. The spread is the difference between what is being offered for a stock (the bid) and the price being asked for the stock (the ask). Spread trading attempts to buy at the bid and sell at the ask, over and over again. Spread traders may make hundreds or even thousands of such trades a day. With the advent of spreads as low as one penny, spread trading has become much less profitable than it once was.
Counter-trend traders will look for signs that a stock is topping or bottoming out before they place a trade in the opposite direction. For example, reversal traders use tools such as the TICK, TICKI, Put Call Ratio, volume, etc. to anticipate a change in trend.
The term “day trading” is a widely misused and misunderstood term. Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock market is closed due to news that can affect the prices of your stocks.
Unfortunately, many people who claim to be “day trading,” hold stocks overnight because of fear or greed, thus setting themselves up for the catastrophic elimination of their capital. When day trading currencies, the term “day trading” changes slightly. Since currencies can be traded 24-hours-a-day, there is no such thing as “overnight” trading. Thus, you can have open positions for longer than a day with active stop losses that can be activated at any time.
Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations..
You basically watch the stock market all day long, buy and sell multiple times throughout the day, trying to buy it low and selling it high and then rebuying it when it drops back down, etc. Very dangerous, and hard to do. Studies have shown day traders do worse in the long run than buying stocks and holding onto them for longer terms. Plus you have to pay commission or fees every time you buy and sell, and taxes on your capital gains are higher for stocks held for less than a year.
Do you think differently…. Use the comments section to give your views
Categories: Investing Trends, Trading Basics
Yes it is good article.YOU write flawless articles but can you explain whether day trading is good or long term is good for trading. Awesome. Do rply. Pls.
Hello to all the viewers, Everybody has a different perspective towards intraday trading. It depends upon how much your backing of funds is and the only way one can earn profit in it is by thinking in seconds,instant decesion making and not getting greedy One must always put a stoploss with maximum of 2% of share’s current price and book profit at 3.5% dont think of becoming a millionare in intraday if you are focused can sustain pressure and have ample time to study market then only go for intraday.
Hi,
Your site is very informative. I am also a day trader. You have mentioned about put call ration. Can you explain how does it help day traders like me?
Thanks in advance,
Jaya
What you said is correct Sidhant… i have talked with people who do all these stop loss @ 2%(say) and profit booking at 3.5% (say) but the problem is their mentallity… Thoug they keep this profit Booking at 3.5% in mind when they sit and see the rise in price..they dont sell it at this 3.5%…their greed makes them wait and utimately they wait till they have to look for stop loss
…this is more of a mind game..Those who are strong in following their decisions can easily gain but others ?!!!!!! 
day trading can also be profitable as ‘short – medium term’ trading (of course, then it is no longer a ‘day tarding’ technically) provided that(a) onlly shares with good potential are bought (b) and that the shares are bought in cash
yaa it is right that in day trading you can buy and sell securities, but for that you must buy first and then sell.
if you are going to sell first then it means you are going to short and you may open your position for several days.
Hi, Intra day trading one should have back of fund, and need to have weeks analysis of the particulara stock, and must sell the target price set by him either profit or stop loss without greedy anyway we should target always most active shares with atleast months low and high price of particular share which we invest.
hi, it is interesting to note that most of the people [80 percent]
are in the market without studying it.And when it comes to common investor like us we never stick to our decision while trading.Greed and fear will overtake us.it is really a mind-game ,those are mentally strong enough to overcome these things can be masters of stock-market/weak minds.
can i buy one share today and sell tomarrow. what will be the charges if i do it in icicidirect.com
hi..most investors look for earnings per share and net assets per share. Their eyes goes straight into the GREEN COLORED FIGURES. They would never stop to consider how the company is performing. Its all mind game.Tame your thoughts.