What is Day Trading?
Learn the Basics
Is it a particularly risky way to play the stock market? Is it a technique to get rich overnight? Is it the reason for today’s volatile market shifts? What is
day trading, exactly?
Day Trading: An Overview
By the strictest definition, a day trade is a position that is entered and exited in a single day.
According to experts at Online Trading Academy, that actually makes it safer rather than riskier.
Because day traders don’t hold their positions overnight, they avoid the possibility of a surprise in an overseas market, unfavorable economic news or an earnings report that comes out after the markets are closed.
Even though after hours trading is available for many securities, the market is thin and it’s likely the position will “gap down” (open at a dramatically lower price) the next day after a negative overnight event.
In addition, day trading tends to reduce, not increase, market volatility. Day traders are typically looking for their profits in small price movements up or down.
Their trades provide liquidity which keeps markets running smoothly, as compared to lightly traded markets which are subject to dramatic price swings.
And no, day trading is not a way to get rich overnight. Done properly, it is a conservative investing approach that is utilized by many institutions as well as well-educated individuals who do it as a profession.
It’s their choice whether or not to use leverage (buying securities with a brokerage line of credit) which can magnify profits, but also increase potential losses.
Online Trading Academy is the leading resource for trading education, with 36 global centers as well as many online courses.
Along with day trading, (which the Academy calls “short-term” trading to avoid the negative connotation attached to “day” trading) the company teaches trading strategies that can be applied to the medium or long term.
In fact, they’re the same strategy just different time frames.
When to Make a Trade
A chart is a chart. Once you know what to look for, the same simple rules-based strategy can be applied to any time frame, from in-and-out the same day to retirement planning.
While “day” trading is for the short term, “swing” traders hold positions for a few days and “position” traders might not close out a winning position for months or even years.
Online Trading Academy helps students learn how to identify when price enters a price area where they should make a trade.
This might happen several times a day, or it might take considerably longer depending on objectives and trading style.
Both bull markets and bear markets are used in Online Trading Academy’s trading strategy.
Education for Traders
In addition to the stock (also called equities) markets, Online Trading Academy offers trader education related to
futures, options and currency trading as well as
a wealth management track for those who are less active as traders but want to stay on top of their portfolios.
Prospective students generally start with a free introductory class where they can learn more about day trading and other trading topics. It’s called
the Power Trading Workshop and is offered on a regular basis at local education centers.