Day Trading Definition – What Does Day Trading Mean?
The term day trading, as the name suggests, is when an investor buys and sells shares of stock or other financial investments during the course of a single day. All outstanding positions are settled before the market closes each and every day. The main objective for a day trader is to make quick profits from any shares price increased or decreased throughout the day. This type of investing has become very popular over the last decade and continues to increase in popularity on a daily basis.
Wikipedia’s definition of day trading is “The buying and selling of securities on the same day, often online, on the basis of small, short-term price fluctuations.” About.com’s day trading definition is a little bit different but carries the same tone, “Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed.”
When buying and selling stocks, a day trader will generally select a style that is suited to that particular investor. For example, some may only hold shares or stocks a matter of seconds or minutes. This type of trading style is known as short-term trading. If the investor holds shares throughout the business day then this style is known as swing or position trading. Some day traders will even combine the investing styles but most will generally pick a certain style and stick to it.
There are different kinds of trades as well, such as counter-trend, ranging, and trend trades. Counter-trend trades go against the current stock price movement as in selling when the price is going up. Trend trades is trading in the opposite direction or trading in the direction of the price movement such as buying when the stock price is going up. Then there is ranging trades which are trades that move back and forth between two prices, generally used when market movement is going sideways.
Some investors will make several stock moves per day while other may only make one single trade in a given day. At the end of the day, it doesn’t matter how many day trades you have made but how much money you have made. This is truly what is important in the world of day trading online.