4 Lessons Learned: Trades

A Basic Guide to Day Trading

Day trading is simply buying and selling stocks on the same trading day. Before the market closes for the trading day, most trading positions are closed.

Day trading is different from after-hours trading in that it is confined to the open hours of the stock exchange; trading that continues after regular hours is after-hours trading.

Day traders are the people who buy and sell during day trading. One might think that day traders are living very hectic lives. This may not be so in actual practice. In the course of a trading day, one may make several trades or you may just limit yourself to just one trade.

You may even just buy a stock on one day and sell it on the next day if you think that it is not profitable to sell it on the same day. You are not really restricted by law to finish off your trading activity the same day. You may have to pay some differential on brokerage if you carry your trade to the next day.

At the end of the trading day, traders usually close their trading positions. Your trading frequency will depend entirely on your trading strategy for that particular day, or your general trading style and outlook.

Short term trading is done by some traders. They finish off their trades in a matter of a few minutes or seconds. These are high volume traders who buy and sell several times a day. Brokers reward them with big discounts on commissions because of the huge volume of their trades.

There are those who don’t mind these reduced brokerages. These people are not short term traders since their focus is on momentum or trends of the stock movement. Sometimes there are really strong trades during the day and this is what these types of traders look for. They don’t mind making only few trades a day.

Sometimes there is a gap between the closing and opening prices on a stock and this is why some traders make sure that all their stocks are sold before the market day closes. This is the golden rule of some traders and they follow this religiously.

Still, other traders believe in allowing the profits to run so they stay with the position even after the market closes.

In day trading, the profits and losses come quickly. Although you might think that day trading is like gambling, there is a marked difference between the two. In day trading you make strategies which you cannot do when gambling.

If you want to learn more about day trading, click here for more info and tips.