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What is a Day Trader?

What is a day trader?  You hear people discussing being a day trader on the news or television program. But you still do not have a clear understanding on what a day trader does. A day trader participates in the purchasing and selling of stocks on the same day.  The process for succeeding in day trading is based off the profits made throughout the day’s sales. In order to make a profit, different strategies need to be implemented. The strategies often require the day trader to think and act quickly in order to make a profit or to stop a large loss.

Trend Following

Trend following is a strategic approach to investment; a day trader must have up to date information on the market to act in an immediate, informed manner. A day trader will follow the current market trend to determine if the prices are going to rise or fall. The strengths or weaknesses of the companies are not as important as the current financial trends within the particular market.

Trend following is all about the different strategic moves needed to make a profit in the market. The moves will depend on the current trends and the effect on the market. A day trader can utilize a market for short, medium or long term moves. By analyzing the market atmosphere, a day trader can determine if the stocks will continue to rise for a gain or fall for a loss.

Trend Fading

Trend fading is considered to be a risky strategic approach to day trading. When this type of strategic approach is done correctly, the payout or profits can be high. The trick in trend fading is the ability to know when to sell or buy.  In trend fading, you are taking a risk against the main trend which numerous others could be following. A day trader would actually sell the stocks while the price is rising in hopes the trend stops. When the trend stops rising, begins to fall the strategic approach has been a successfully implemented.

The day trader could also use trend fading to purchase the stocks as the prices are falling.  Other day traders may be quick to sell stocks if the value declines. The strategy behind the falling price purchase is the hope the stocks will turn around; going against the prevailing trend. If the lower priced stocks rally after a considerable decline; the result would appear in a larger profit margin.

Scalping

Scalping is a strategic move involving immediate turnaround. The strategy involves selling the stocks right after the value rises from the trade purchase. The quick selling of the stocks that are showing a profit is a limited price change. The theory behind this strategic approach is smaller, profitable moves will gradually catch up to any type of larger profitable gain.  Scalping often helps in preventing larger losses.  The quick selling is an exit strategy when the stock values start to decline.

When applying the right strategic approach, a day trader can make profits through the buying and selling of stocks. Using the strategic approaches to the day trader’s advantage will result in profits.  You still may be asking yourself what is a day trader; the simplest answer is a person who purchases and sells stocks in hopes of a profit.  The critical details of the strategic approaches to being a day trader makes the job more complicated.  The complications may result in a large payout.