Day trading is the practice of active buying and selling of the stocks, options, futures and currencies within a trading day. All trades are completed within a day so that after the closing of market the day trader do no hold any open positions and therefore are not subjected to any overnight risks. The traders trade against very small changes in price of the financial instruments. Day trading is usually a vigorous trading activity requiring high concentration and time during trading hours. Day traders can be grouped into two broad categories as scalpers and momentum traders. Scalpers trade in large quantities completing each trade within seconds or minutes. Most scalpers are usually large financial firms or investors like institutional traders. Momentum traders are usually individual traders who trade according to the stock market trends. The trading volume of momentum traders usually depends on the market condition. Some other popular trading strategies include range trading, news playing and rebate trading.

However, system trading can be difficult to implement in practice because it typically requires you to take all of the valid signals produced by your system in order to allow the system’s edge to manifest itself. This is because it may take a considerable amount of trades in order to turn a profit with a mechanical method. As a result, your system will often produce entry signals that run contrary to what your common sense is telling you. For instance, the current trading day may be a very strong bullish trending day without any signs of selling; however, if your system produces a valid short signal, then you must take the signal without question in order to allow the edge to manifest under a system trading approach. Or, if you are in a trade and prices come very close to your profit target and suddenly reverses back toward your entry, you must stay in the trade if your system trading rules require you to do so, even if you believe strongly that the trade is failing. This type of trading is very hard on the emotions because it often requires you to make decisions that go against logic.

The most important thing, other than the money, trading system and market account, that a day trader need is the market information. Market data enables day traders to pick suitable products to trade. Day traders need live or real-time market quotes as a small delay in information can cause them huge loss. It is the trading system that they use serve for this purpose. Advanced systems provide these information as graphics and are usually have alerts and triggers to automate trades. Day trading systems also use technical indicators and various mathematical tools to facilitate the picking of stocks, futures, currencies, etc.

As told earlier, there are a variety of products available for day trading. The most popular ones are the stock and the forex currencies. Others include options like stock options and futures options, and futures like currency futures, stock futures, stock index futures and commodity futures.

Day trading facility is available for most stock, options and futures market, but note that most brokers offers services for limited markets/exchanges. The trader also must be keen to choose markets according to the product they are trading, their financial status, the brokerage they are affiliated to, the trading system they uses, and their geographical location.

The advantages of day trading include high profit making chance, no overnight risks, high leverage, rapid returns, no margin interests etc. The disadvantages include higher chance of loss (especially to new traders) and the requirement of high concentration levels and time. The requirement to payoff interest on margin and transaction costs can make the situation more serious. It is estimated that over 80% of day traders have to afford loss.

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