Day Trading

Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions will usually (not necessarily always) be closed before the market close of the trading day. This is different from After-hours trading. Traders that participate in day trading are called 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.

Day trading used to be the preserve of financial firms and professional investors and speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, day trading has become increasingly popular among casual traders due to advances in technology, changes in legislation, and the popularity of the internet.



First of all let me give you few tips that you must follow if you are going in for day trading;

1. Big moves with little volume : There is something that you should consider. When a small stock go up quickly ( more than 6% ) with low volume, you have to sell this stock, in fact this big move come probably because the big spread or the amount of shares avaible for sale at that time ( illiquid stocks ). Generally if a stock move with big volume, it means that alot of people bought the stock or a big player bought a large quantity of shares. In both case more money than usual make the stock move.
2. Uptick Rule : The uptick rule come when you short a stock, its used to prevent stock to go down quickly and deeply. An uptick is when the inside bid is raised by a cent, and its necessary to have an uptick in order to your short selling order to be executed. When you put a market order to sell a stock, you need an uptick to be executed. If this don't happen and the stock continue to fall, and fall again and after 2% down an uptick occur, you will be executed at that price (2% of slippage, that's alot). Now to prevent from that, you need to put a limit order , you will be filled or not at this price but in that case slippage won't occur.
3. Using stop order : Using stop is very important. When entering a buy (sell) order, you must know the price of the closest support (resistance) and place your stop order a few tick below (above) it. You can use a stop limit or stop market. A stop will be triggered when the stock price goes below the stop price (When being long).

Well these are a few tips for the Day trading.

Now I will tell you some problems that people face when going in for Day Trading;

• Execution of your orders are delayed due to order backlog or technical problems causing you to be filled at a higher price than you intended to pay.
• You enter the wrong stock symbol when placing your order online.
• You lose track of the many orders you have placed during the day.
• your online broker's Web site goes down during the day and you cannot complete your trades.
• Crossed or locked prices may occur for a period of time during which orders are not executed at all.
• Failure or delays of real time data feeds can cause you to take an mistaken view of market conditions.
• You misread a price quote and enter an order on the basis of this mistaken quote.
• Your ISP goes down during the day leaving you without an Internet connection.
• You place a market order as the price falls and find your order executed minutes later at a higher price because of the large backlog in unfilled orders for the stock.
• You find that the online order function you wanted is temporarily unavailable.
• You find out that, on a particular day, bid-ask size is not updated as frequently as it should be or is inaccurate.
• You act on a ''hot tip'' from a newsletter or Web site that caters to day traders and later learn that this source is paid by third parties to make recommendations.

I hope that this will help you when you are going in for day trading. Hope to hear more from your side.