Understanding How Day Traders Make Money

March 1, 2018


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Day trading is a theoretical investment system that has numerous comparisons with other investment-based models that the investor makes through buying and selling a financial tool (such as commodities, indices, currencies, stocks, etc.). Traders expect to make a profit on the rise or fall of their share’s price according to predictions of what its future behavior is. The variance with other investment systems is that in the case of day trading, the stakeholder opens and closes actions during the same trading day.

Understanding the system

This way of investing in the short-term is smart since the trader does not usually leave open positions from one day to the next. There are many day traders that will hold their positions open for a few minutes or seconds (this technique is called scalping). When it comes to day trading, the investor usually operates in real time looking for buying and selling opportunities that fit his or her investment strategy.

Once they locate a specific tool that suits them, they open a position and once that position becomes a profit, they will close it (even if it is a small gain). Repeating this type of trading with several investment instruments as many times as possible is the name of the game, but the common pattern is that they do not usually stay open beyond the same day.

Always close the same day

There are plenty of reasons why many investors prefer day trading as an investment strategy. For instance, day traders prefer to close their positions before closing the market and avoid possible losses due to differences between the closing price of the session and the opening day of the following day. They opt for this style of trading as a short-term strategy because it allows them to open numerous positions and achieve a day-to-day profit objective instead of a longer-term investment where long-term profits may disappear or be considerably diminished in future fluctuations.

With day trading. People should avoid taking the cost of the night premium that most online brokers apply to keep the positions open from one day to another. For more information, check out the BBB page for Rockwell Trading today.

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