What is Day Trading?

Day traders use a very short time-frame when holding positions. They can hold a position for seconds, minutes, or even hours throughout the day. Many day traders feel that holding a position for more than thirty minutes is eternity. They rarely hold a position overnight because of the risks involved. Stocks do not always open at the previous day’s closing price. The stock could open the following morning dollars higher or lower. This could be very painful for the trader holding a large position if it moves in an undesired direction. Because day traders commonly trade 1,000-share lots, an overnight change of $2.00 in the stock price would make the trader richer or poorer by $2,000.

Swing trading is a style of trading with a lot of similarities to day trading. Many of the strategies outlined in this manual are also relevant to swing traders as well as longer-term investors. The key difference between day, swing, and investing traders is the length of time the trader plans to hold onto the securities. For example:

Day Traders
Hold positions throughout the trading day, but none at the closing bell.

Swing Traders
Hold positions for longer than one day. This could simply be because they buy near the close of the stock market and hold their position overnight to sell immediately the next morning. Normally, they hold their positions for three days to two weeks, but this period can be longer.

Investors
Usually hold positions for more than four months.

Scalpers
A different breed of trader. Normally, they hold a position for seconds, but it could be as long as minutes and as short as milliseconds.

Please click on the links below to read additional risk disclosures.