NEWS :
December 13, 2005
Day trading Introduction
Day trading is holding positions in stocks,futures... for a short time, less than one day.
If a day trader enter a position at morning, he must close it before the market close.
If he hold position overnight, he become a swing trader
If he hold position more than 2 weeks he become a position trader...
Day trading has many advantages. Probably the best one is avoiding the overnight risk.
- Use of Margin : Generally brokers offer 2:1 margin for overnight trades and
4:1 margin for day trading trades, this let day traders who have for example 10 000$ in cash to invest
40 000$.
- Overnight risk : Days of day traders are not easy, they should take action quickly and be able
to watch alot of stock quotes at the same time. But when market close, a day trader can forget the market and
concentrate on his life, because of course he closed all his positions.
so all market or stock news that came outside trading time doesn't affect his portfolio.
Example : Imagine a very bad news that come Sunday, for traders who hold positions, if they want to sell
their positions, they must wait for monday at open and sell them after probably a big loss.
The day trader is protected from these kind of situations.
- Lower commissions : With some brokers, if you are very active (taking alot of trades per month) you get a discount for your commissions. Day traders are generally very active because they enter and close many positions per day.
So you can profit from this discount unlike swing and position traders.
- Taking quickly your profit : You don't have to wait for weeks or months to take
your profit like swing or position traders.
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