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.

The first is that the day trader is less exposed to event risk than a long term trader. I get in and out of the market as quickly as possible. I am in the market during primary trading sessions, so my stops are normally filled at or near the specified price. A long term trader may find that an unforeseen event triggers big moves when primary markets are shut, forcing price to gap way beyond protective stops when markets re-open. Minimizing exposure to event risk while trading leveraged instruments is a key benefit of day trading, and why I think it is one of the least risky forms of trading when done properly. Another reason I prefer day trading is that I can work through losing spells more quickly. All trading methods encounter drawdowns when traders have a losing spell. If a typical drawdown for your system spans a period of 10 trades, and the average duration of each trade is 2 weeks, you face drawdown periods averaging twenty weeks. But if you are a day trader completing one trade each day, your average drawdown period is just 10 trading days. If you complete more than one trade per day, the drawdown period is even shorter. It is never pleasant being in drawdown and it is easier to stick to your system if drawdowns are short. Twenty weeks, or more, in a loss situation tests the resolve of any trader.

Day trading can be considered as an offspring of high speed electronic communication networks. Most day traders today trades markets from a distant location such as their home or work area. They use trading software, the direct access trading platform, installed in their computer connected to internet to execute trades in real-time. In order to qualify for the trades, the trader must maintain a margin in the corresponding market. It is the day trading broker who maintains the margin for the trader and provides the direct access trading platforms. Although there are web-based trading platforms available, they are not suitable for day trading.

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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