What is Day Trading
Day trading is now gaining popularity among casual forex traders. This popularity is enthused due to advances in today's technology and the connectivity brought by the internet. Let's see what are the characteristics of day trading and what makes it so popular.
Day trading simply put is buying and selling (i.e. the actual trade of currencies) of financial instruments within a trading day. A day trading deal would start at the opening of the market at the beginning of a trading day and would renew at night.
A day trading deal would usually terminate on 3 situations: first is by instruction from the trader, second as specified by a stop loss/take profit order, and third when the deal has reached its end date.
Day traders (i.e. those who participate in day trading) involves a wide range of individuals or entities from financial firms, professional investors, banks, and even a host of private individuals who are casual traders. Some have said that since many private individuals take part in day trading that it has become the perfect home-based job.
The next question is, why is day trading so popular? Let's take a look at what day trading can offer part time or casual traders.
First off would be the huge allowance on trade frequency. Day traders can be very casual or not necessarily that active on the market. Some traders participate in only a number of trades per day, while others do hundreds of trades in a given trading day. Some day trading deals would last from a few seconds to a few minutes a time. Some traders even buy and sell currencies in large volumes. Brokerage firms offer discounts when a trader makes volumes of trade.
Those who take on very few trades a day are the ones who wait patiently for a strong movement in the market. They would prefer to wait for a big momentum to come along then catch the wave when it comes.
Second point: though positions are settled at the end of a trading day some traders can choose to continue trading overnight. Day trading allows a trader to stay at a position overnight (some companies charge a renewal fee if you wish to stay at a position).
Third point has to do with returns. Day trading can become an extremely profitable (though high risk) business. Some casual traders make trading a good part-time or second job. And some traders are able to make a consistent and honest living by day trading alone.
Frequency of trade, flexible overnight positions, and rapid returns have made day trading very popular among part time traders. With the help of modern day technology and the internet trade is now made available to everyone.