Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close for the trading day. Traders that participate in day trading are called active traders or day traders.
Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures. Indeed, many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among at-home traders.
As modern trading is electronic, the exchanges are run by computers, and are accessible via the Internet, so traders can work from almost anywhere in the world using only a few tools and services. Some of these tools are things like a computer, Internet access, and a telephone, so most people already have some of the tools that are needed for day trading.
There are several basic strategies by which day traders attempt to make profits:
- Trend following
- Contrarian investing
- Range trading
- Opening Only Orders
- Rebate trading
- News trading
- Price action
- Algorithmic trading