Day trading

A day trader opens and closes positions within a single session, sometimes holding them for only minutes or seconds, so that nothing is carried overnight. Day traders try to profit from small price movements, often using technical analysis, real-time data and a high number of trades, and many use leverage through margin accounts, CFDs or futures to make small moves worthwhile. Every trade incurs costs, including commissions, the bid-ask spread and sometimes financing charges, so a day trader needs gross profits large enough to cover a heavy and constant cost burden before earning anything.

Studies of retail day traders in several countries have found that most lose money over time and very few earn consistent profits after costs. Day traders compete directly with professional firms that have faster systems and better information. Where leverage is used, losses can be large and can exceed the money in the account. In the US, special margin rules have long applied to frequent day traders; the old pattern day trader rules, with their fixed minimum account balance, are being replaced by intraday margin requirements. Day trading is a different activity from long-term investing, which relies on owning businesses and compounding returns over years.