Day trading definition

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What is day trading?

Day trading is a short-term strategy that involves closing out all trades before the market closes. As such, day traders tend to have no open positions held overnight.

Instead, a day trader will attempt to profit from intraday trades by taking advantage of small movements in price. By using financial derivatives, they are often able to trade on markets that are making negative moves as well as positive ones.

Characteristics of a day trader

Day traders can speculate on a variety of markets, including stocks, forex, commodities and futures. The rise of trading technology and increased prominence of margin trading, which amplifies both profits and losses, has made day trading more popular in recent years.

Day trading requires time, focus and dedication as it involves making fast decisions and executing a large number of trades. Day traders don’t necessarily need to trade all day, but do need to stay vigilant and stay ahead of the markets. 

Day traders have to think differently from investors, as buying low and selling high might not always be in their best interests. CFDs and spread bets are both useful products in that respect – as financial derivatives, they can be used to take both long and short positions on various markets.


How to start day trading

In order to start day trading, you'll first of all need an account with a trading provider. You can open an account with IG in minutes, and once you do there's no obligation to fund or trade. 

After your account is open, you can find your first opportunity. It is important to decide on a day trading strategy and research your market’s opening hours — while forex trading hours are 24-hours, other markets daily hours will vary.  

Find out more about day trading strategies.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.