What is a Day Trader?

A day trader executes numerous short and long transactions throughout the day to capitalise from price movements. The aim is to profit from very short-term price movements. Day traders often use leverage to increase returns, which can also amplify losses. Day traders use various strategies, targeting price action driven by temporary supply and demand imbalances resulting from the buying and selling of assets. Positions are typically held for milliseconds to hours and are usually closed by the end of the trading to avoid any risk after hours or overnight.

How Day Trading works

Daily trading is a fast-paced strategy that involves buying and selling securities within a single trading day. Investors capitalise on small price movements in highly liquid stocks or other financial instruments, opening and closing positions in hours, minutes, or even seconds. The goal is to profit from short-term market inefficiencies and price fluctuations. Unlike traditional “buy and hold” investment strategies, short-term traders do not hold positions overnight, closing all trades before the market closes.

How to start Day Trading

Professional day traders have a deep understanding of the marketplace, are well-established, and can earn a living from it. Here are the steps to get started:

Educate yourself

Gain a solid understanding of the market, including how to use fundamental and technical analysis.

Ensure sufficient capital

Start with enough capital to meet regulatory requirements, and only invest what you can afford to lose.

Create trading criteria

Develop specific criteria for your trading strategy and commit to following them consistently.

Day Trading Strategies

To succeed in day trading, individuals need to have an edge over the market. Active traders use various strategies, including swing trading, arbitrage, and news trading. They refine these strategies to achieve consistent profits and minimise losses.

Basic rules to follow:

Common intraday strategies:

Scalping: Focuses on making numerous small profits from brief price changes that occur throughout the daily cycle. Arbitrage is a type of scalping that profits from correcting market mispricings.

Range/swing trading: This strategy uses preset support and resistance levels to guide buy and sell decisions.

News-based trading: This strategy capitalises on volatility around news events, such as mergers or acquisitions.

High-frequency trading (HFT): These strategies use algorithms to exploit short-term market inefficiencies.

Pros and Cons of Day Trading

Pros

No overnight risk: One of the biggest advantages of day trading is that positions are not affected by potential negative overnight news, such as important economic and earnings reports or broker upgrades and downgrades that occur either before the market opens or after the market closes.

Tighter stop-loss orders: Investors can use tight stop-loss orders to limit losses on a long position. Additionally, access to margin increases leverage, allowing for potentially bigger profits.

Cons

Higher costs: Daily traders may not have enough time for positions to become profitable, leading to increased commission costs from frequent trading, which can eat away at profit margins.

Higher risks: Engaging in short selling or using margin can quickly amplify losses, leading to margin calls and increased financial risk.

Begin your forex trading journey

To succeed as a forex trader, you need patience, consistent practice, and a dedication to ongoing learning. Begin by understanding the fundamentals, creating a trading strategy, and refining your skills as you advance. Whether you’re interested in short-term trading, swing trading, or long-term strategies, the forex market provides many opportunities.

All trading involves risk. It is possible to lose all your capital.

T4Trade, with registered address of F20, 1st Floor, Eden Plaza, Eden Island, Seychelles, is a trade name of Tradeco Limited.

Damadah Holding Limited, with registered address of 365 Agiou Andreou, Efstathiou Court, Flat 201, 3035 Limassol, Cyprus, facilitates services to Tradeco Limited, including but not limited to payment services.

Tradeco Limited is authorised and regulated by the Seychelles Financial Services Authority with licence number SD029.

Risk Warning:

Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

T4Trade is not targeted to residents of the EU where it is not licensed. T4Trade does not offer its services to residents of certain jurisdictions such as USA, Iran, Cuba, Sudan, Syria and North Korea.

Legal Documents

Client Services Agreement
Privacy Policy
Complaint Handling Policy
Conflicts of Interest
Order Execution Policy
Risk Disclosure
Cookie Policy