Introduction

There are many strategies available on the market today when it comes to the trading of stocks and one of those strategies is known as day trading. Day trading is perhaps the stock trading strategy that the newcomer to the profession is most familiar with simply because it is the type of trading that appears on all of the television shows and movies that deal with trading. The series Traders when it was premiering on televisions all across the world dealt primarily with day trading and it is for this reason that the buy and sell of the high activity day trading stock exchange floor is what most people have in their mind when they think about investing in the stock market.

Day Trading

Simply put, day trading is the strategy that is most focused on the short term. While most of the strategies focus on the medium or long term and for the most part do not involve quick moves on different stocks, day trading is all about quick moves. No stock that is purchased in a day trading strategy is held for longer than the actual trading day and for that reason it is not at all uncommon for people with day trading strategies to hold onto stocks for a few hours before they end up selling them. In fact, if a person comes up with a day trading strategy that allows them to capitalize on extremely quick upswings and downswings in the marketplace they might actually only hold a particular company’s stock for a few minutes before they end up getting rid of it in order to cash in on quick movements.

Advantages of Day Trading

The biggest advantage of day trading is perhaps the psychological advantage that it has when compared to other forms of stock market trading. In the other forms of stock market trading, it is not at all uncommon for you to buy stock from four or five different companies on the first day of your trading career and then keep most of that stock for the new few years, only engaging in trades every now and then to switch stocks or to buy more of a stock that is performing particularly well. While it can be extremely fruitful over the long term, the typical type of stock trading can also be boring and for that reason is not something that appeals to the vast majority of prospective investors. New people to the game like action and they want to feel like they have a direct influence over their investment portfolio as frequently as possible.

This is where day trading comes in. Day trading usually involves the opening and closing of stock market positions multiple times a day and it is not uncommon for some sort of buying or selling deal to be executed every hour of a trading session as a person attempts to capitalize on short moves in the marketplace in order to make themselves some money. Day trading can keep someone interested in trading long enough to learn enough of the trade that they can then settle into a more sustainable, long term investing strategy.

Disadvantages of Day Trading

As seems to be a recurring theme in the world of stock trading, there is only one disadvantage inherent to day trading but it happens to be particularly large. Day trading is extremely risky and for that reason it is not uncommon for someone to end up losing all of their money in a single day through poorly timed and poorly placed trades. Day trading is not for beginners and it requires a sense of experience combined with a heavy amount of research. A day trader will often spend four out of five days scouting the perfect trade only to make it on the fifth day and end up losing money as a result. Day trading is not recommended for beginners, although many beginners might enjoy it because of the high amount of action.