Day Trading Stocks
What is Stocks Day Trading?
Day trading stocks, as it names suggests, refers to a particular way of trading the stock market, namely buying and selling stocks in the course of the same day with the purpose of making a profit from the difference between the opening and the closing price. This is made possible because of the wide fluctuation of stock prices during the day. Indeed, just as stock prices may vary significantly from one day to the next, they also vary during the day, providing day traders with many opportunities to profit from smaller changes. You should be aware that while this practice has lucrative potential, it also carries a level of risk.
Some traders have actually made a profession out of day trading stocks and claim to possess unbeatable strategies – which of course they are unwilling to share. Like in regular stock trading, there is an element of skill involved in day trading stocks, which often comes down to thorough technical analysis.
Ways of Day Trading Stocks
Traders are usually more inclined to day trading stocks on the NASDAQ rather than on the New York Stock Exchange because fluctuations in the former are usually greater than those in the latter. Regardless of the stock index you are trading on, you must be aware that this type of trading is not meant for everyone. Day trading stocks is very time-consuming and can be extremely stressful. Day traders must be able to react promptly to the markets and make quick decisions. According to the trader’s profile, stock day trading can be done over various time periods:
- Short-term day trading stocks: in this type of trading, positions are opened and closed within a few minutes and even few seconds (“scalping”).
- Longer-term day trading stocks: in this type of trading, while positions are still opened and closed within the same day, they are held for a few hours or for the entire day.
Stock day trading methods may also be categorized according to the current direction of the stock price:
- Stock day trading with the trend (“trend trades”). This is similar to a regular investment in stocks: you buy when the stock price is rising, and you sell when it goes down. This is also commonly known as “following the trend.”
- Stock day trading against the trend (“counter-trend trades”). As their name suggests, these are trades that go against the current direction of the stock price – i.e., you sell if the price is rising.
- Stock range trading (“range trades”). These are trades that go back and forth between two price levels. Traders use range trades with a sideways market direction.
While most traders are faithful to one type of trading, some use combinations or change their strategy according to market conditions. Whatever strategy you decide to choose, make sure you know the risks involved before you start day trading stocks.