daytraders

Daytraders are market participants who seek to profit from intraday price movements by opening and closing positions within the same trading day. They generally focus on highly liquid markets such as stocks, futures, options, and foreign exchange, and often trade with the use of margin or leverage to magnify small price moves.

Typical approaches include scalping, where traders target tiny profits on many trades; momentum trading, which aims to ride quick price surges driven by news or breakouts; and mean reversion, which bets on brief reversals. Day traders rely on technical analysis, real-time quotes, level II market data, and fast order execution. Some use automated trading systems or algorithms to place and manage orders. Risk management is central: strict position sizing, stop losses, and defined daily loss limits help control drawdowns.

Capital requirements and costs are significant. Day trading commonly involves frequent commissions and borrowing costs. In the United States, the pattern day trader rule requires a minimum equity of $25,000 in a margin account to execute more than three day trades in five business days; different jurisdictions have other rules.

Regulatory and tax considerations vary by country. Profits from day trading can be taxed as short-term gains in some jurisdictions and as ordinary income or capital gains in others. The activity also carries substantial risk, including rapid losses from volatility, liquidity gaps, or execution errors, and is generally not suitable for all investors.

Participants include individual traders, professional day traders, and those employed by proprietary trading firms or brokers.