Day trading or intraday trading is a speculative form of investment and trading strategy. It consists of trading in financial instruments (such as currencies, stocks, indices, commodities, etc.), including their purchase and sale, made on the same trading day. All trades must be closed before the market closes.
Day trading
The main difference from other investment systems is that in day trading or intraday trading, the investor opens and closes his transactions on the same trading day. Thus, it is a way of investing for a short or very short term, as the trader usually does not leave positions open from one day to another. There are many traders who keep their positions open up to a few minutes or seconds (this technique is called scalping).
In day trading, the investor trades live and opens a buy or sell order according to his trading strategy. Once the buy or sell order is executed and the investor has made a small profit, he closes the position and repeats this process as many times as possible during the trading session.
Advantages of intraday trading
Day traders want to minimize their risk by closing their position before the end of the trading session, thus avoiding the difference between the closing price and the opening price when the market starts the next day. These price differences are called GAPS, and we will discuss them in the following articles in our blog.
With proper money management, day traders can afford to lose some positions and keep the ratio of profit to loss positions positive. Achieving a high confidence ratio is something we teach in all TBS courses. So it allows us to minimize risk, but it also brings a greater psychological factor into a trader’s decisions.
Since we open and close all positions on the same day, the broker does not charge us for what is called a swap. This is the premium that each broker sets for leaving positions open from one day to another. The swap fee varies depending on whether it is a long (buy) or short (sell) trade, and also depending on the asset we are buying. We can even find positive swap fees, although positive fees are usually small compared to negative ones.
How do we do day trading?
The most common type of intraday trading is CFDs, as it is a very flexible investment product, since we do not physically own the financial instrument in which we invest, and they allow us to execute both buy and sell transactions immediately.
The leverage offered by brokers allows you to operate with a relatively small amount of money as a guarantee and work with a much larger amount. In this way, you can achieve a positive return very quickly and make profits within minutes.
Until recently, day trading was a strategy reserved only for institutional traders, financial institutions and professional traders. Today, thanks to technological advances and the numerous online brokers offering their services, any private trader who has some capital and, most importantly, proper training can put this concept into practice. All you need is a good Internet connection and you can trade from your computer, tablet or even your cell phone.