Day Trading
Day trading is buying and selling securities within the same trading day, aiming to profit from short-term price movements.
Day traders open and close their positions on the same day, so they hold nothing overnight. They try to profit from small intraday price moves, often trading many times a day and using charts, real-time quotes and technical indicators.
Day trading is demanding and risky. Studies of retail day traders have generally found that most lose money over time, once trading costs, bid-ask spreads and taxes are taken into account. Profits on short-term trades are typically taxed as ordinary income in the US.
US rules have special requirements for frequent day traders who use margin accounts. FINRA rules define pattern day traders and set minimum equity and other conditions for them; the details can change, so traders should check the current rules with their broker. Many day traders also use leverage, which magnifies both gains and losses.
Day trading differs from swing trading, where positions are held for days or weeks, and from long-term investing, where holdings are kept for years.
Example: a trader buys 200 shares at $50.00 at 10 a.m. and sells them at $50.40 at 2 p.m., a gross gain of $80 before costs.