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Day Trading - An Overview

Day trading of financial instruments is the most energetic of all trading activities. Day trading is defined as the completion of trading, buying and selling, with in a day. A day trader completes many trades in a day so that at the end of the day he/she is free of any open position. Three main advantages of day trading are higher leverage, the exemption from paying off margin interest and from overnight risks. Day trading involves a serious amount of risk and is only recommended for practiced traders. A day trader buys and sells the financial instruments for very small price differences, usually very small fraction of a penny. Thus their profit mainly depends on the number of asset involved per trade and number of trades done.

Unlike olden days, where only stocks are available for day trading, today day trading can be done for stocks, stock index futures, currency futures, commodity futures, currency futures, future options, stock options and currencies. Day trading is now available for both major market products and over-the-counter (OTC) products. Many day trading brokers today offer access to more than one market and also to more than one product. The choice of trading market and product is upon the trader, who has to do so by taking account of many factors like his financial background, initial money investment, trading experience and his geographical location. All day trading activities requires considerable time and attention with good mental heath, and so cannot be done as a part-time business.

Today?s popularity of day trading is mainly because of the electronic boom in the 90?s. The emergence of discount brokers and direct access trading has revolutionized this. Today a day trader can trade the markets around the globe with a trading platform installed on a computer connected to high-speed internet, virtually from anywhere. The discount brokers with their low cost, electronic trading service for all major stock markets have equipped traders with lot of tools to execute their trades. The live stock quotes, customizable eye catching charts, tickers, programming capabilities, triggers and alerts, technical analysis tools, and real time account details provided by brokers through their stand alone trading systems have greatly reduced the requirement of human interpretations to find tradable products.

Day trading can be done using many strategies like news playing, scalping, momentum or trend trading, rebate trading or range trading. All strategies have both merits and demerits. Day trading holds virtually unlimited profit making change and also holds unlimited loss suffering chances. The need of paying off transaction costs and margin interests can substantially reduce a trader?s profit.

Praveen Ortec works for NobleTrading.com, a discount broker providing online stock day trading (http://www.nobletrading.com/stock-day-trading.php) on 4 different online day trading systems (http://www.nobletrading.com/day-trading-system.php). Checkout this broker comparison table (http://www.nobletrading.com/online-broker-comparison.php).


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