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What is Day Trading?

Day trading is not the same as investing. The ultimate objective of any day trader is to make meaningful gains in a short amount of time. Day Traders like volatile assets, because they can take advantage of large price movements that happen in a single day or even hours. 

Stock market day traders identify volatile stocks on the NASDAQ and NYSE markets. They trade in increments of 1,000 shares or more, and profit from the small intraday price movement. Because of the large position sizes, small price fluctuations result in massive profits. A day trader can place many trades in a single session and hold onto their stocks for only a few minutes and rarely overnight. Day traders are short-term price speculators. They are not investors, and they are also not gamblers. The Forex market is a welcoming place for day trading because currencies are always trending up and down.

Day trading is not investing. Day traders conduct their analysis over short timeframes within a day, for example, 1-hour charts or even 15-minute charts. Their only intention is to exploit the stock or currency pairs intraday price fluctuations or daily price volatility. Unlike investors in the stock market, day traders are not looking for long term price appreciation from the assets they hold. 

In Forex and stocks, market volatility is commonly a course the market takes rather than an anomaly. Most stock prices move up or down in any given day due to a variety of external circumstances. Even if the market is relatively calm, there are always volatile stocks. 

Day traders try to recognise an asset that is trending and then follow with that trend. “The trend is your friend” is a common motto among day traders. Day traders attempt to pick up a small price movement. If day traders are trading a large position, then day traders will profit significantly from large price movements. Conversely, if a day trader acquired 1,000 shares and the trader was wrong, which also happens, then the day trader will lose as much as they stand to make. Volatility is a double-edged sword.

In the Forex and stock markets, there are plenty of day trading opportunities. It is not abnormal for a day trader to place as many as 100 trades in a single day. An investor, on the other hand, trades on a much longer time frame. Investors seek a far greater price movement to earn the desired rate of return. That takes time to accomplish.

To summarise, day traders seek to extract profit from intraday price volatility by trading the market frequently, whereas investors seek long-term capital appreciation for the assets they hold.