Day trading is trading over the period of no more than a day, and still represents a particularly short term trading strategy in the context of share trading. Day traders look for investment opportunities over the course of a day, and as a result end up trading on emerging trends or market announcements. Day trading is designed to produce a smaller daily yield which compounds into something much larger, and aims to eliminate much of the depth of research and analysis required in identifying longer-term positions. One of the main difficulties with day trading is identifying a sufficient number of opportunities to deliver your daily returns expectations, and this can often lead to high levels of engagement and discipline required from the trader.
How do day traders make a profit?
Day traders try to make a profit by identifying share trading opportunities that are likely to yield a return over the period of the trading day. As a result of the limited time frames, the chances of a home run trade are minimal, with most day traders instead settling for a modest yield from their individual trades which are aggregated across a larger number of individual transactions. Day traders need to be on the constant lookout for opportunities in markets that are set to move on the day, and they need the discipline to cut out early from positions that don't work out to avoid damaging their capital. At the same time, day trading can incur higher costs than regular trading, which hamper and handicap trading performance and yield on capital.
Is day trading expensive?
Day trading can be expensive, but traders can keep it under control. With every trade that is opened, a commission payment is attached and paid to the broker. These can add up to be a considerable expense across a number of transactions, and as a day trader, you will tend to engage in more frequent transactions than other investors. This can make day trading expensive, and can serve as a significant dampener on trading profits. In order to keep a handle on expenses, it's important for day traders to be selective in the transactions they enter, and take a more calculated approach to ensure they are making the best investment choices. Shrewd day trading that delivers a greater yield can reduce the number of transactions required to meet earnings targets.
Is day trading easier than regular trading?
Day trading is often seen as the perfect route of entry for beginners to the share trading markets, providing the instant gratification of daily trading profits and the perceived comfort of knowing that damage is limited to the present trading day. While day trading is often seen as less risky and less intellectually demanding, it nevertheless requires more hardwork and more active management than other trading strategies with a more long-term outlook. In order to make a success of day trading, you need to execute far more trades than those with more traditional strategies, and this means that both the additional research and the extra costs involved should be factored in to deciding whether day trading is still a preferable strategy.