It is a type of stock trading where both buying and selling of a financial instrument is done on the same day and all the trading are closed before the market close for the day. Traders who participate in day trading are called active traders or day traders. Day trading demands fast decision and fast action.
Some of the methods of day trading are:
Arbitrage a kind of hedged investment meant to capture slight differences in price. When there is a difference in the price of something on two different markets the arbitrageur simultaneously buys at the lower price and sells at the higher price.
Momentum Day trading
It is a method of stock trading, where in a trade is made, when the stock is making a trending movement and the trade is closed at the end of the day.
As the stock prices move up and down, they tend to form recognizable recurring designs or figurative diagrams, called chart patterns. Trading these patterns gives us more consistent profitable trades.
It is a technique of trading and profiting in stock market. It is a day trading strategy and focuses on taking very small profits from hundreds of trades. It involves taking quick and small profits, using the ask and bid differences.
Price Action Trading
It is a technique of stock trading and profiting in stock market. This is a simplistic and minimalistic approach to trading. This approach considers action of price only that is open, high, low and close of a time period. The time period can be a minute, five minute, thirty or sixty minute. Some traders consider volume also for decision making, though it is optional. The trade is closed on the same day of opening.
It is a technique of stock Trading. The trade is taken at the beginning of the price swings and closing at the end of the price swing and on the same day of opening the trade.
It is a technique to trade any financial instruments, profiting on price fluctuation, which follows a sensitive news release. The trade is closed on the same day of opening the trade.
Short Term Trading
A trade period of more than one day to a few weeks is considered as short term trade. A stock is bought and held in position from one day to a few weeks. A short trade is entered by creating a sell position, which is covered by buying after one day or in a few weeks.
Medium Term Trading
A trade period from a few weeks to a few months is considered as medium term trade. A trend is followed with tailoring stop loss.
Swing trading with higher time period (for example using weekly bars) and Elliot wave trading are the methods suitable for these types of stock trading.
Long Term Trading
In this type of stock trading, stock is held for many months to many years. Investment decision is made by fundamental analysis of a stock. Profit from growth of the company, dividends and bonuses attracts this type of stock trading.