Day Trading Stock Information
A day trade is buying or selling stocks, options, and commodities during the same trading day and closing the position by the end of the trading session. Day traders monitor the stocks they purchase throughout the day in the hopes they will go up in value. The number of transactions made by a day trader in a trading session can number into the hundreds. Many banks, investment firms and individuals engage in day trading.
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When Did Day Trading Start
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Before the advent of the computer, stocks were bought and sold on the floor of the exchange. Tickets were physically written detailing the transfer of the stock from buyer to seller. In most cases, brokers charged a commission on the trade. A typical commission was 1 percent of the total amount of the transaction. The Securities and Exchange Commission outlawed fixed commissions in 1975. This opened the market for discount brokers to charge low commissions, making short-term or day trading potentially profitable.
Risks
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The amount of leverage involved in day trading and the possibility of quick returns makes day trading potentially profitable. This leverage also comes with high risk and the potential for catastrophic losses that have bankrupted many traders. It is these losses that made the SEC)implement regulations to safeguard inexperienced traders from the dangers of day trading. In response, the SEC restricted day trading of stocks to accounts with more than $25,000. This regulation does not apply to commodities and futures market.
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Technology
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A considerable amount of technology is involved in day trading. Day traders need to have access to databases that provide constantly updated information. Typically, day traders need high-speed Internet and a computer capable of handling multiple monitors. Day traders also need computers with fast processors and a significant amount of memory. Day traders live or die by the ability to execute transactions in split seconds. Before you should even consider day trading, you need to have the technology in place to give you the tools for success.
Strategies
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Different strategies can be used in day trading to minimize the risks involved, but no method guarantees success. Scalping, contrarian trading, and trend trading are some of the strategies that day traders use. Rumor and news trading is another method used by day traders.
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