What is Day Trading?

Investors can buy or sell securities whenever they like, but when they do at the right time, that is known as a simple trade. But if they close the whole transaction in one day, it is Day-Trading. Day traders acquire or sell securities and complete transactions in a single day. 

A day trader with expertise and experience can also obtain significant profits. Flexibility is essential for day trading to benefit from the rapid rate fluctuations. To learn and understand what is day trading, read the details below.

Understanding Day Trading Meaning 

The purchase and sale of stock on the same trading day is known as day trading or intraday trading. The day trader may buy first, sell later, or buy later. They buy when the market is "bullish" and sell when it's "bearish." Day trading is usually prevalent in the stock, foreign exchange, futures, and options markets. Day traders find stocks with liquid, highly volatile momentum in the market and make entry or exit at a good time.

Day traders generally use a high degree of leverage. Although leverage can enhance their profitability significantly, it can also raise a considerable financial burden when the trade does not go according to expectations. Day traders need sharp eyes because they've got to analyse news on the move and charts like pros.

Stock markets are moving because of the collective opinion of both traders and investors. Some traders can take advantage of an opportunity and put money into the system, for instance, while others can perceive danger and withdraw it. Due to the irregular movements in stock prices, day traders are trying to make money.

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Table of Content

  1. Understanding Day Trading Meaning 
  2. How to Start Day Trading?
  3. Day Trading Stocks
  4. Top Strategies for Day Trading
  5. Benefits of Day Trading

How to Start Day Trading?

Regarding intraday trading, it's best to keep an open mind. While there's a chance of profit, there's a real risk. In addition, here are some additional considerations to consider when entering the day trading business.

1. Before you start, you need to figure out your strategy. 

When you day trade, you occasionally have to lose money, which terrifies people into making poor decisions. It's essential to have an exit plan for each investment portfolio so you can avoid making emotional decisions if you are going to make a rational decision.

2. Keep Patience

Look for opportunities that meet your trading plans. If the situation doesn’t meet your needs, avoid doing any trade.

3. Overview Market

You have to watch what is happening on the markets constantly. Major news unrelated to your investments may change the market tone and move positions without company news.

Day Trading Stocks

Picking intraday trading stocks using technical analysis rather than fundamental analysis, which involves examining company factors such as its products, industry, and management, day traders who focus on stocks often rely on technical analysis or analysis of stock movements on a chart. Some day traders may trade hundreds of different stocks daily, while others focus on a few stocks. This knowledge will help you determine when it is appropriate to purchase and sell, what the stock has been trading in the past, and how it can perform.

The stock market provides day traders with liquidity and volatility, most often in the hours following its opening, from 9:30 a.m. until almost noon, and again in the final hour of trading before the closure at 3:30 p.m.

Top Strategies for Day Trading

If you are a beginner in day trading, you must follow some essential and helpful strategies. Strategies in intraday trading for beginners are as follows. 

1. Momentum Trading

Momentum trading is the identification of the market trend. A market trend can be bullish, bearish, or sideways. 

2. Range Trading

Range trading means identifying support and resistance levels at the right moment when entering or leaving a trade. The Fibonacci Retracement level indicator is often used in drawing support or resistance lines.

3. Scalping

Scalping is the practice of engaging in many extremely brief trades and keeping the profits from profitable deals. 

4. High-Frequency Trading

HFT uses an automated computer-based trading system to track price movements and place automatic trades.

Individuals must have a Demat and trading account to operate as a day trader. To open an account and start trading, you must provide your PAN card, Aadhaar Card or Selfie photo. You may also use this account to purchase commodities, currencies, futures or options in addition to stock trading. 

Benefits of Day Trading

The advantages of day trading are as follows.

1. Short term Returns 

No legal investment instrument can offer you such a significant return as day trading. With unlimited funds, you can enter the market at 9:00 a.m. and leave at 3:00 p.m. 

2. No Overnight Risk 

The capital of day traders is not exposed to overnight risk, since they close their positions before the market closes. Therefore, as soon as the markets close, any negative news will not disturb their peaceful sleep.

3. Multiple Markets 

Day trading is not limited to equity securities. You can also become a day trader in commodities, currencies, exchange-traded funds, ETF futures, options, etc. 

4. Leverage 

Brokers provide intraday traders with leverage facilities. The amount of leverage or margin depends on your eligibility. You can buy more shares at a margin if you need more balance in your account. So you can purchase stock worth Rs.50 000 and invest Rs.10,000 with a margin of 5 times or 5X.

Day trading can give you profits or cause huge losses. This is an extremely risky choice of investment. Though day trading is still a fascinating prospect for individual investors, anyone who thinks they could make this happen requires knowledge, resources, and cash to enable them to succeed. You can explore day trading on your stock trading app and trade with research & plan.

FAQs on Day Trading

Day trading is an investment activity in which investors actively buy and sell securities during one day, hoping to profit from price fluctuations. The participants in day trading frequently borrow and leverage capital at the same time each day to buy additional assets, but this also significantly increases your risk.

Though it's not illegal or unethical, daily trading can pose a great deal of risk.

Day trading is extremely risky for beginners if they do not know it properly.

You must take the best possible action by regularly monitoring a company whose shares you wish to trade. Make your decisions based on solid evidence backed by research reports and reliable information from the right source.