Day trading
Day trading is, as you might guess from the name, buying and then selling shares in one day. But the term is more generally used to mean any kind of short-term trading where shares are held only for a very limited period, perhaps up to a week or two.
Day trading involves identifying shares that are moving fast, buying them without delay, and then jumping off just as quickly. It’s a frenetic type of trading which requires constant attention to price movements and many, many hours stuck in front of a screen.
It rose to fame during the 1999-2000 technology boom, when anything—and everything—was going up. And that gives you a clue to its success in more typical markets. Anyone can make money when markets as a whole are going up. The fact that those who quit their jobs to day trade a few years ago are mostly back in their offices now tells you this.
With so much fast-paced trading, profits—or losses—will typically be small and numerous. And don’t forget about brokerage charges. Brokers love day traders because they generate so much money for them. Day trading is more a fad than a systematic approach to investing. And those who practice it usually fail to consistently make money over long periods.
We struggled to find an example of a successful day trader but failures were everywhere. American Sucker by David Denby describes in excruciating detail the collapsing life of a day trader—a salutary tale indeed for those considering throwing in their day job.
Further Reading
- Wikipedia has a comprehensive page on day trading.
- As does this article from Women in Investing.
