Day trading is one of the most used techniques by the traders for getting quick and high returns. This technique is nothing but buying shares and selling them on the same day. The share prices will never be constant. It gets fluctuated. It can go up and down in minutes. In day trading, both buying and selling happens on the same day. Every market opens in the morning and closes in the evening. The traders who practice day trading can be termed as day traders or active traders. Also, the brokerage fee is comparatively less for day trading.
1. Types of day traders:
There are two types of day traders: Institutional day traders and retail day traders.
Institutional day traders:
Institutional day trader’s work for financial firms. These traders will be exposed to more tools and resources. They have good knowledge of day trading. They work for firms so that the customers of the firm get satisfied.
Retail day traders:
A retail day trader is individual body. They don’t work for firms. They can either be individual or a team. They invest their own money on trading. Retail day traders use online broker sites or they contact brokers directly for trading. Recent advancements in Internet have attracted much more retail day traders.
2. Trade frequencies:
A day trader can buy or sell unlimited number of shares in a day. Shaving and scalping are few methods, which involves short span of time. Different day traders follow different strategies. Every day trader aims for high profit. If a trader feels that the stock price has reached its highest then he suddenly sells the share. The trader should study the pattern of the price variation before entering into trading. Also, the current economic situation should also be tracked and the impact of the economic activities on the share price should be well studied. A wise trader can correctly judge the time period when a share can increase. Some people just buy the share when the market is in a closing state and sells the share the next day when the market opens. Day traders are eligible for margin trading. Margin trading is the concept where the trader need not invest the whole amount of money for buying shares. A part of the money would be provided by the brokerage itself. Also, the brokerage fees is also very less for day traded stocks.
3. Risk factor:
Day trading has both pros and cons. It could either end up with a huge profit or a big loss. More analysis needs to be done before starting the day trading.
4. Range trading:
In this type of trading, automated software monitors the share price. Trader can set upper and lower limit. The software will automatically sell the share if the share price either reaches the upper limit or if it goes beyond the lower limit. Software with artificial intelligence and customized tools are provided many online brokerage firms. This software should be utilized better to earn more profit in day trading.