What is day trading?
Day trading is when you buy and sell stock within a single day. If the price of the stock goes up during the day, you make a profit. If it goes down, you make a loss.
Where have you heard about day trading?
Stories about people making wins or losses on day trades often make the news. These stories usually talk about someone buying a stock in the morning, then selling it in the afternoon for a much higher or lower price.
What you need to know about day trading...
Day trading is not "investing" but speculating and that makes it a potentially very risky business. Warns the Securities and Exchange Commission:" Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status." Part of the risk, but also an aspect of the potential reward, is that day traders rely to a great extent on borrowing money or trading on margin. Technical analysis can mitigate some of the risk as you get a feel for how a particular market or specific security will react to events. On-line platforms mean more retail investors are getting involved in day trading but they need to beware of either paying commissions or to wide bid-ask spreads. The best platforms charge no commission and offer tight spreads.