What is day trading? Definition & Meaning - nextmarkets Glossary

To count as day trading, the trader must be specifically seeking to buy and sell financial instruments in the same trading day. Strictly speaking, trading activities can only be considered as day trading if all positions are fully closed before trading ends for the day. The trader must both enter and exit the market on nextmarkets within a trading day, otherwise, the activity will be considered short-term trading instead of day trading.

Day trading is sometimes the only trading strategy that traders will be using.  There are financial speculators who exclusively trade stocks in this way; however, others will use day trading as part of a wider trading strategy. Still asking yourself what are stocks? Read our introductory article as a refresher.

Despite much speculation and frequent rumours among amateur traders, day trading is not illegal. It is, however, a risky business. The profitability of the practice of day trading is one of the most debated topics among traders. Over the last decade, there have been countless scams online, creating confusion by overpromising on the possible returns within impossibly short amounts of time – promoting day trading as the latest “get rich quick” scheme.

The rumours of illegality probably stem from these scams and a misconception that the practice of day trading in some way damages market prices. If you want to get into day trading, make sure you choose the nextmarkets free trading software that offers analyses and tutorials, as well as provides assurances on the security of your deposits.

One of the key ways in which day traders try to minimise their losses and maximise their profits is to use free day trading software. There are a number of different indicators which day trading software will track.

Automatic pattern recognition will look for flags, channels and other market signals and alert traders to opportune moments to trade. Traders can also consult the nextmarkets best day trading app or trading platform for backtesting results. These results tell you what would have happened if you had used a certain strategy in the past, giving you an idea of how you might choose to trade in the future.

Trend following – a strategy used across long and short-term trading on nextmarkets, assuming that the market will continue heading in the same direction if it has been moving steadily in that direction for a while.

• Contrarian investing – the opposite of trend following. This strategy assumes that a rising market will start to fall and that a falling market will start to rise.
• Range trading – this strategy assumes that the market will always stay within its usual range. As soon as a price hits its support or resistance line on the market, it is expected that the market will turn around.
• Scalping – this is a popular strategy among day traders as it involves exploiting the gaps in prices which are created by the difference between a market’s buy and sell price. These usually have to be exploited in a matter of minutes or seconds. You can learn more about this in our Scalping Trading Strategy guide.

The majority of day trading terminology used by traders is no different than that used in other trading strategies. Many of the same actions take place as with longer forms of trading on nextmarkets, but they simply take place within a condensed time period. If you have experience trading in other ways, chances are that you will recognise a lot of the words and phrases used.

If you are new to speculating and are looking to learn day trading for beginners, then it is worth having a glance over a day trading glossary before you get started. It is also recommended that you look up any words or phrases which are unfamiliar so that you are certain you have correctly understood the meaning. Otherwise, you could make mistakes in an already risky practice.

What is the day trading desk? The trading, or dealing, desk is a key resource for traders dealing with large amounts of money and purchasing and selling large numbers of assets. The trading desk can be even more crucial for day traders than for traders adopted other strategies in the market. The desk gives these speculators the ability to execute their orders instantaneously and is used in conjunction with the nextmarkets platform.

This is vital for successful day trading, as seconds can make all of the difference if there are sharp movements in the market price for a certain financial instrument. Day traders who can get in their orders before the rest of the market begins to move are the ones who will have the biggest advantage.

Although technically anyone can make trades within in a day as long as they have access to the market and a nextmarkets day trading account, it takes a particular set of characteristics to make a successful day trader. Successful day traders will have experience and knowledge of their chosen market. They will have a deep understanding of what “normal” looks like for that market and the best indicators to look out for.

Day traders also need to have deep pockets, and restraint. They need to have a reasonable amount of money, but to also know to only invest money that they can afford to lose. Lastly, but by no means least, day traders need a strategy to try and beat the market. For all of these reasons, day trading is an approach more suited to professionals than amateur traders.

If you are already experienced in the markets and are thinking about stepping up your game, then you might be considering getting started with day trading. nextmarkets provides potential day traders with everything they need to begin their day trading adventure.

Just download our app to your iPhone or Android device, or use our web app via your browser to gain access to the markets, all the latest market data and software and apps to help with reading the market for signs and indicators. While we cannot provide the confidence and capital, all of which are vital characteristics of a successful day trader, we can equip you with insights and support from the pros to give you the best chance for success. Download your free nextmarkets demo account today and learn the ropes of trading shares, with £10,000 of virtual currency.