Day Trading
A day trader is a trader who will open a position and then close it before the end of that particular trading day. Usually, day traders make trades with very large amounts of money since the market does not very much during a typical trading day. Day traders tend to stay away from the mainstream retail brokers since these brokers have high transaction fees. When executing trades with the frequency of an avid day trader, this would add up very quickly. Instead, they utilize direct-access brokers, whom usually charge a miniscule fee for each share purchased. Such brokers also increase the speed of the transaction, a vital point of importance for day traders. While day traders may have breaks in these areas, there are other difficulties they face. One is the SEC label of “pattern day trader.” To fit this label, you must be guilty of placing four day trades within the five day trading week. If a trader is placed in this category, they become subject to special trading rules, the main one being a minimum of $25,000 being kept at all times in a margin account. Trades can only be made with this margin account. These harsh requirements have been placed by the SEC in order to prevent beginning traders from taking part in day trading. Day trading is viewed as rather risky because of the amounts of money involved and the frequency with which trades take place.
Top-end technology is necessary for the day trader. Decisions need to be made on up-to-date information. This makes the latest and best software available from their brokers necessary. Trades also need to be enacted as quickly as possible. This makes a high-speed internet connection a must. In addition to this, many traders will use multiple computers in order to speed up transaction time.
Again, the SEC warns that day trading is extremely risky. Likened to gamblers, traders are warned that day trading can lead to quick financial ruin. The SEC site features many reasons to avoid day trading that can be found here: http://www.sec.gov/investor/pubs/daytips.htm. The site adds that day trading is not illegal. It is only severely risky.
For more infomation on The Stock Market choose from the list below. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking - Business Finances - Economics - Insurance - Investing
Major Purchases - Personal Finances - Stock Market - Taxes
|
