Day Trading

Day trading refers to purchasing and selling various types of financial instruments within the same day in order to make profits from the price discrepancy. The person who follows this type of trading approach is called- a day trader. Usually the new traders tend to be more attracted to day trading as they want to get out of the pressure of holding a large amount of money at stake and want to sell off the instrument for profit as soon as the price goes up. Some of the most common financial instruments that investors usually use for day trading includes: stocks, currencies, futures and options.

In the past, only the financial institutions like banks had the privilege of practicing this trading approach as only they had the access to market information and exchanges. But due to technological advancement like online trading, now even individual investors can go for day trading.

Different Styles of Day Trading

Now there are a number of day trading styles available that are followed by the traders depending on their personalities. These styles include both long and short term trading. Position trading and Swing are considered as long term trading where a trader holds his position throughout the trading day. On the other hand, scalping is a short term trading approach where the trades hold the positions for only a few seconds or minutes. Usually majority of the day traders prefer to stick with a single style for day trading while some follows multiple styles.

Types of Day Trading

There are various types of day trading available in the market which includes:

• Ranging trades,
• Trend trades, and
• Counter-trend trades

In case of ranging trades, the trader moves back and forth between two prices. This type of trading is executed when the market moves sideways. In case of trend trades, trades are executed in the direction of the present price movement (like buying the stocks when the price is moving upwards). On the other hand, counter-trend trades refer to trading against the direction of the price change (for example, selling the stocks while the price is climbing). Like trading style, day traders usually prefer to stick with a single type of day trading where some traders like to deal with multiple types depending on the latest market scenario.