Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks and negative price gaps between one day's close and the next day's price at the open.
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Day trading was once an activity that was exclusive to financial firms and professional speculators.
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Day trading gained popularity after the deregulation of commissions in the United States in 1975, the advent of electronic trading platforms in the 1990s, and with the stock price volatility during the dot-com bubble.
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Day trading is risky, and the U S Securities and Exchange Commission has made the following warnings to day traders:.
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Day trading requires a sound and rehearsed method to provide a statistical edge on each trade and should not be engaged on a whim.
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Trend following, or momentum Day trading, is a strategy used in all Day trading time-frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa with falling.
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Rebate Day trading is an equity Day trading style that uses ECN rebates as a primary source of profit and revenue.
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Price action Day trading relies on technical analysis but does not rely on conventional indicators.
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Market-neutral Day trading is a strategy that is designed to mitigate risk in which a trader takes a long position in one security and a short position in another security that is related.
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Algorithmic Day trading is used by banks and hedge funds as well as retail traders.
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The SOES system ultimately led to Day trading facilitated by software instead of market makers via ECNs.
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Ability for individuals to day trade via electronic trading platforms coincided with the extreme bull market in technological issues from 1997 to early 2000, known as the dot-com bubble.
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The retail foreign exchange trading became popular to day trade due to its liquidity and the 24-hour nature of the market.
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