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A day trader is a trader who adheres to a trading style called day trading. This involves buying and subsequently selling financial instruments e. Depending on one's trading strategy, trades may range from several to hundreds of orders a day.
There are two types of day traders: Both institutional and retail day traders are described as speculators , as opposed to investors. Institutional day traders work for financial institutions and have certain advantages over retail traders due to their access to more resources, tools, equipment, large amounts of capital and leverage, large availability of fresh fund inflows to trade continuously on the markets, dedicated and direct lines to data centers and exchanges, expensive and high-end trading and analytical software, support teams to help and more.
These advantages give them certain edges over retail day traders. Retail day traders use retail brokerages and generally trade with their own capital. Auto traders use computer programs and other tools to enter trading orders automatically.
Because this all happens with the help of a computer algorithm, it is also called algorithmic trading. Day traders' objective is to make profits by taking advantage of price movements in highly liquid stocks or indexes.
Investing With the Best and Brightest of the Financial Internet , the more volatile the market, the more favorable the conditions for the day trader, regardless of the longer-term direction in the market. Unlike some fund managers and investors who hold positions over longer periods of time and are averse to selling equities short, the day trader is not committed to a position and can adapt to whatever condition the market is in, at any given moment.
A day trader who wants to achieve success needs appropriate knowledge, equipment, tools and markets together with the ability to trade the right electronic trading platform. A day trader with the right information might be able to succeed, otherwise, success will go to the other person in the transaction or to the broker , if he happens to be the best informed person in the transaction.
Also, a successful day trader needs to know which stocks to trade, when to enter the trade, and when to get out of the trade. Part of this knowledge is to find those stocks with liquidity and volatility , in order to generate profits. Day trading is stressful because to watch of multiple screens to spot trading opportunities and then react quickly to exploit them.
There are many different markets for day trading , including futures, forex, stocks, options and etf's . Because of the short time horizon, day traders will look at the market with a different perspective than a long term trader but both types of traders can trade in the same markets. Possible reasons for the surge in retail forex trading include the now high margin requirements in individual U.
However exchange-traded funds ETFs have gained rapidly in popularity, being seen as a less expensive way to trade all futures markets as well as some more exotic markets not otherwise available to retail day traders. The amount of margin required by most retail forex brokers in contrast is negligible. With full size lots , units of currency , mini-lots 10, and even micro-lots 1, all with up to as much as The sheer volume of the forex market makes it a difficult one to manipulate in any meaningful way, even with the money available to large proprietary and institutional trading interests.
Day traders engage in speculation that is considered negatively in a moral context. From Wikipedia, the free encyclopedia. This article is about the occupation. For the practice, see Day trading. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. April Learn how and when to remove this template message. Philip; Steil, Benn United States of America: Retrieved 26 March Retrieved 29 June Archived from the original on July 23, Retrieved June 1, How you can trade like a pro: Retrieved 8 April Commodity Futures Trading Commission.
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