Day Trading: Rules, Risks, & Strategies

Seeking Alpha2021-09-09

Thanks to the advent of online trading houses, it's far easier now to get in the game of day trading. Before the Internet, only people working for large financial institutions, brokerages, or physical...

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精彩评论

CKF68
2021-09-10
CKF68
Stressful task
AhGirl
2021-09-10
AhGirl
👌🏻
koolgal
2021-09-10
koolgal
Not all investors are traders. Similarly not all traders are investors. Which one are you? 👍😉🎉🎊🎉
- koolprofit:
  I'm both and more of trader currently....If need to build bullets then need to be a trader.....
- koolgal:
  Thanks for sharing. I am a bit of both, more investor type. We each play our strengths to great advantage on our way to building wealth 👍😉🎉🎊🎉
- Benly8:
  I am both
- koolgal:
  Great! Thanks 👍😉
Mhong
2021-09-10
Mhong
Like & comment
bernardtayet
2021-09-10
bernardtayet
Day trading needs a bold heart and lots of luck. Energy n time are much needed.
JoelLee
2021-09-10
JoelLee
Reply and comment pls thx
- sSS:
  Ok

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Before the Internet, only people working for large financial institutions, brokerages, or physical...</p>\n\n<a href=\"https://seekingalpha.com/article/4453955-what-is-day-trading\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".DJI","symbol_name":"道琼斯","start_time":0,"source_url":"https://seekingalpha.com/article/4453955-what-is-day-trading","article_id":"1150166367","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1150166367","pubTimestamp":1631166698,"sourceInfo":null,"weMediaInfo":null,"summary":"Thanks to the advent of online trading houses, it's far easier now to get in the game of day trading","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".DJI":"道琼斯",".IXIC":"NASDAQ Composite",".SPX":"S&P 500 Index"},"translate_title":"日内交易：规则、风险与策略","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".DJI":0.9,".IXIC":0.9,".SPX":0.9},"content_text":"Thanks to the advent of online trading houses, it's far easier now to get in the game of day trading. Before the Internet, only people working for large financial institutions, brokerages, or physical trading houses, could take part in the stock market in such an active fashion. Today, markets and transactions are accessible to almost anyone.\nMoMo Productions/DigitalVision via Getty Images\nWhat Day Trading Is\nAt base, day trading consists of frequently buying, selling and short-selling equities in a short period of time, usually reversing out of several positions within the same trading session. The aim is to earn a profit on each trade, sometimes even small profits, and watch those gains compound. The practice can be risky, but also highly lucrative.\nDay trading may sound enticing for those looking to make a swift profit, but it can be extremely challenging to make a formidable career out of the practice. In fact, a study published by the University of California, Davis, in 2010 revealed that only 1% of day traders consistently make a living from that practice.\nBut for the few who can succeed in the high-stakes world of day trading, it likely will consume most to all of their time. It is very much a full-time job.\nHow Day Trading Works\nAt its core, day trading is all about stock market volatility; day traders look for stocks that are on the move. Whether it’s positive or negative news which alters a stock’s trajectory, economic reports, corporate earnings, or simply a change in market mood, day traders cash in on rapid change. They enter and exit positions very quickly. Day traders must monitor positions closely, and often make quick, high-stakes decisions. There's no going to the pub for an afternoon drink hoping the positions they've taken will turn out.\nSomething to note, opportunities are not limited to betting that an investment security will rise in price; traders can also profit by betting on downward price movements. Liquidity is also very important to day traders, even more so than other investors. Since day traders need to be able to move in and out of positions with ease, they need to look out for equities which are highly liquid.\n\nKey Takeaway: Day trading is very much about stock market volatility; day traders look for stocks making moves over short time spans.\n\nMost day trading strategies offer a lot of flexibility, allowing day traders to keep their positions open from a few minutes to a few hours. The amount of time that the position is open depends on how the trade is doing and whether the day trader can seize a profit at that time.\nDay traders can consider a variety of markets such as futures, equities, currencies, and options. And they can have access to all the exchanges via a direct access broker. It’s one of the fastest and most affordable ways to engage in day trading.\nMethods of the Day Trader\nThere are various types of day trading, each suited for different styles. They can range from short-term trading, where stocks are held for a few seconds or minutes, to more long-term positions where stocks are held throughout the trading day.\nDay trader strategies include:\n\nScalping:This method seeks to make many small profits on small price changes throughout the day.\nRange trading:This method mostly relies on support and resistance levels to make decisions. (Support and resistance levels are concepts which assist traders to fully comprehend and act in the markets. Support refers to a price level where a downtrend is interrupted due to rising demand for an asset. Resistance refers to a level where an uptrend reverses a sell-off.)\nNews-based trading:Here, day traders take advantage of volatility surrounding news events.\nHigh-frequency trading ((HFT)):This method utilizes algorithms to exploit small or short-term market inefficiencies.\n\nSwing Trading vs. Trend Trading vs. Buy and Hold\nWhile a day trader closes out his positions at the end of each trading day, a swing trader can hold her positions for days to even weeks before selling. In swing trading, since there is more time for an equity’s price to increase, there is also more opportunity to profit. With the right selling strategy, swing trading can be much less risky than day trading.\nBy contrast, trend trading involves using a stock’s past price movements to make predictions on its future trajectory. Since trend traders operate on a longer timeline, they can also gauge broader economic trends and business cycles to determine when to buy and sell a stock. This strategy isn’t usually applied by day traders or swing traders.\nMeanwhile, buy-and-hold is often hailed as one of the best strategies available to investors. Under this approach, investors buy an asset and hold it for a few years or even decades, if they wish to, no matter what bumps occur along the way. The aim of this highly passive investing style is to ride out short-term market instability and losses in order to maximize returns over the long term. This is the basis for most long-term investing programs like 401(k)s and IRAs.\nBuying on Margin\nDay traders often use borrowed money to make trades, a method called “buying on margin.” With a margin account, a trader can use the securities they already own as leverage to borrow up to 50% of the value of the security they’re going to buy. Buying on margin can help day traders increase their profits substantially — far more than what they could have made using their own money. But the practice doesn’t come without risks. Leverage magnifies one's losses when trades don't work out, resulting in costly margin calls.\nDay Trading Rules and Risks\nWhile day trading is neither illegal nor unethical, it can be extremely risky. In fact, the Securities and Exchange Commission warns on its website that the practice can result in substantial financial losses in a very short time.\nWhile conventional investing involves the careful analysis of stocks to determine whether an investment is wise, day traders use state-of-the-art technology and technical analysis to spot intraday trends. The risks to investors can be so grave that the Financial Industry Regulatory Authority has rules in place to monitor this fast-moving practice.\n\nKey Takeaway: Day trading is neither illegal nor unethical, but it can be extraordinarily risky. The SEC warns that it can result in substantial financial losses in a very short time.\n\nIn addition to the SEC, FINRA also provides oversight of day traders and enforces certain rules and limitations. For instance, it specifies that a \"pattern day trader\" must maintain at minimum $25,000 in equity on any day that they day trade. (A non-pattern day trader is only required to maintain $2,000). Furthermore, the required minimum equity must be in the account before any day-trading begins. And if the account slips below $25,000, day trading is not permitted until it is restored.\nA day trader may trade up to four times the account's maintenance margin excess as of end of business of the previous day. If a day trader exceeds that limit, however, the brokerage firm will issue a day-trading margin call. The day trader will then have, at most, five business days to deposit funds to meet that call. The brokerage firm can also charge a commission for these transactions.\nDoes Cryptocurrency Trading Count as Day Trading?\nAnother way to get involved in day trading is via cryptocurrencies. But since they aren’t regulated by the SEC or FINRA, at least at this point, investors won’t have to worry about day trading limits.\nDay Trading Taxes\nDay trading doesn’t qualify for favorable tax treatment. Successful day traders are expected to pay income taxes just like traditional investors in the stock market. In very rare cases, day traders can apply for special day trader tax treatment with the IRS. To qualify for that status, the IRS looks for the following criteria: 1) Profit seeking must derive from daily market movements in securities' prices, not from dividends or longer-term capital appreciation. 2) Market activity must be high. 3) The investor must be trading with both continuity and regularity.\nBut for those who aren’t eligible, the following rules apply:\n\nDay traders are required to pay taxes on investment gains in the year they sell.\nDay traders may offset gains against losses, but the gains they offset cannot total more than their losses.\nIf positions are held for a year or less, ordinary income taxes apply to any gains.\n\nIs Day Trading for Everyone?\nFor a new investor just starting to get into the markets, day trading likely isn’t suitable. Most day traders bring with them substantial training and knowledge about the markets. And with just one bad trade, large amounts of money can be lost very quickly.\n\nTip: Day trading isn't usually advised for newer investors. Most day traders possess substantial training and knowledge about the markets.\n\nUnlike brokers who trade other people’s money, day traders are putting their own assets on the line. That’s precisely why regulatory bodies warn investors of the pitfalls associated with this type of trading.\nMany professional money managers even shy away from the practice of day trading. They argue that the benefits don’t warrant the risks. But for all the perils, there seem to be some people who can make a great deal of money.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":883574961,"gmtCreate":1631260987953,"gmtModify":1631892640556,"author":{"id":"4088757684331200","authorId":"4088757684331200","name":"CKF68","avatar":"https://static.tigerbbs.com/0fd6cab827059eec333bac6fa0dfde42","vip":1,"crmLevel":3,"crmLevelSwitch":0},"htmlText":"Stressful task","listText":"Stressful task","text":"Stressful task","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/883574961","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":883220572,"gmtCreate":1631245802796,"gmtModify":1631890390781,"author":{"id":"3581220368294900","authorId":"3581220368294900","name":"AhGirl","avatar":"https://static.tigerbbs.com/d411429a3334d7ec70c2f6e42ea63bf9","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"👌🏻","listText":"👌🏻","text":"👌🏻","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/883220572","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":883262293,"gmtCreate":1631245298012,"gmtModify":1631883826657,"author":{"id":"3559581955535845","authorId":"3559581955535845","name":"koolgal","avatar":"https://static.tigerbbs.com/c05274d88ffc0434623e57350c52c70a","vip":2,"crmLevel":6,"crmLevelSwitch":0},"htmlText":"Not all investors are traders.&nbsp; Similarly not all traders are investors.&nbsp; Which one are you? 👍😉🎉🎊🎉","listText":"Not all investors are traders.&nbsp; Similarly not all traders are investors.&nbsp; Which one are you? 👍😉🎉🎊🎉","text":"Not all investors are traders. Similarly not all traders are investors. Which one are you? 👍😉🎉🎊🎉","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":12,"commentSize":4,"repostSize":0,"link":"https://laohu8.com/post/883262293","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5820932,"gmtCreate":1631282834576,"gmtModify":1634803246837,"authorId":3584059221812022,"author":{"id":3584059221812022,"authorId":3584059221812022,"name":"koolprofit","avatar":"https://static.tigerbbs.com/b35cbe19969d5cb47cac77a79cb59a5e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":883262293,"type":1,"supId":0,"prevId":0,"content":"I'm both and more of trader currently....If need to build bullets then need to be a trader.....","text":"I'm both and more of trader currently....If need to build bullets then need to be a trader.....","html":"I'm both and more of trader currently....If need to build bullets then need to be a trader....."},{"id":5824097,"gmtCreate":1631314077353,"gmtModify":1634803035015,"authorId":3559581955535845,"author":{"id":3559581955535845,"authorId":3559581955535845,"name":"koolgal","avatar":"https://static.tigerbbs.com/c05274d88ffc0434623e57350c52c70a","vip":2,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":883262293,"type":1,"supId":5820932,"prevId":0,"content":"Thanks for sharing.&nbsp; I am a bit of both, more investor type. We each play our strengths to great advantage on our way to building wealth 👍😉🎉🎊🎉","text":"Thanks for sharing.&nbsp; I am a bit of both, more investor type. We each play our strengths to great advantage on our way to building wealth 👍😉🎉🎊🎉","html":"Thanks for sharing.&nbsp; I am a bit of both, more investor type. We each play our strengths to great advantage on our way to building wealth 👍😉🎉🎊🎉"},{"id":5827501,"gmtCreate":1631327259971,"gmtModify":1634802729682,"authorId":3579657215684313,"author":{"id":3579657215684313,"authorId":3579657215684313,"name":"Benly8","avatar":"https://static.tigerbbs.com/80f36222b1c1982caf217686d5a8431f","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":883262293,"type":1,"supId":0,"prevId":0,"content":"I am both ","text":"I am both ","html":"I am both "},{"id":5828844,"gmtCreate":1631334216216,"gmtModify":1634802621862,"authorId":3559581955535845,"author":{"id":3559581955535845,"authorId":3559581955535845,"name":"koolgal","avatar":"https://static.tigerbbs.com/c05274d88ffc0434623e57350c52c70a","vip":2,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":883262293,"type":1,"supId":5827501,"prevId":0,"content":"Great! Thanks 👍😉","text":"Great! Thanks 👍😉","html":"Great! Thanks 👍😉"}],"langContent":"EN"},{"id":883232943,"gmtCreate":1631242341082,"gmtModify":1631887814720,"author":{"id":"3578449123371823","authorId":"3578449123371823","name":"Mhong","avatar":"https://static.tigerbbs.com/f1110c90505cf18cc129130892c4dc2a","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Like &amp; comment&nbsp;","listText":"Like &amp; comment&nbsp;","text":"Like & comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/883232943","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":883644926,"gmtCreate":1631240005965,"gmtModify":1631890666041,"author":{"id":"3583377018896117","authorId":"3583377018896117","name":"bernardtayet","avatar":"https://static.tigerbbs.com/43e8c1fc37a4bff2a94af98953cff267","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"Day trading needs a bold heart and lots of luck. Energy n time are much needed.&nbsp;","listText":"Day trading needs a bold heart and lots of luck. Energy n time are much needed.&nbsp;","text":"Day trading needs a bold heart and lots of luck. Energy n time are much needed.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/883644926","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":883624550,"gmtCreate":1631239083370,"gmtModify":1632883718127,"author":{"id":"3579882572140125","authorId":"3579882572140125","name":"JoelLee","avatar":"https://static.tigerbbs.com/e1f6c92b13d94cba61906c07dbbb2ab6","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Reply and comment pls thx","listText":"Reply and comment pls thx","text":"Reply and comment pls thx","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/883624550","repostId":1150166367,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5814318,"gmtCreate":1631241321685,"gmtModify":1634803725633,"authorId":3574924778363716,"author":{"id":3574924778363716,"authorId":3574924778363716,"name":"sSS","avatar":"https://static.tigerbbs.com/6feafa4a828260badf8636e7a0776299","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":883624550,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":264,"commentSize":44,"repostSize":0,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.25.1","shortVersion":"4.25.1","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1150166367"}