Daytrading

Day trading is a trading approach that seeks to profit from short-term price movements within a single trading day. Traders open and close positions during the same session, typically avoiding overnight exposure to reduce gap risk.

Markets and instruments: Day traders operate in equity markets (stocks and ETFs), futures, options, foreign exchange, and increasingly cryptocurrencies. They rely on high liquidity and tight bid-ask spreads to enter and exit quickly.

Strategies and tools: Common approaches include scalping, which targets small price moves many times; momentum trading, which follows news or price acceleration; breakout and mean-reversion strategies. Technical analysis, intraday charts, and indicators such as moving averages, RSI, or MACD are used. Traders often employ direct-access brokers, Level II quotes, time-and-sales data, and sometimes automated trading systems.

Costs and requirements: Day trading requires sufficient capital, especially in the United States under the pattern day trader rule, which requires at least $25,000 in a margin account to place more than three day trades in five business days. Costs include commissions, spreads, data fees, and borrowing costs on certain instruments.

Risks and limitations: The strategy involves high risk due to leverage, volatility, and rapid decision-making. Most day traders lose money, and success depends on risk management, discipline, and costs. Regulations and broker policies may restrict activity for certain accounts or jurisdictions.

Overview: While accessible through online brokers, day trading remains a niche within faster-paced markets and is distinct from longer-term investing or swing trading.