Day Trading & Advantages

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Overview-of-Online-TradingDay Trading

Day trading is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely held overnight or when the market being traded is closed.

  • Day Trading involves taking a position in the markets with a view of squaring that position before the end of that day.
  • A day trader typically trades several times a day looking for fractions of a point to a few points per trade, but who close out all their positions by day’s end.
  • The goal of a day trader is to capitalize on price movement within one trading day.
  • Unlike investors, a day trader may hold positions for only a few seconds or minutes, and never overnight.

Advantages of Day Trading

Zero Overnight Risk: Since positions are closed prior to the end of the trading day, news and events that affect the next trading day’s opening prices do not affect your portfolio.
Increased Leverage: Day Traders have a greater leverage on their trading capital because of low margin requirements as their trades that are closed in the same market day. This increased leverage can increase your profits if used wisely.

Example: – On Monday, 1000 shares of XYZ stock are purchased. Later on that same day, 1000 shares of XYZ stock are sold. This is considered to be a day trade.

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