Most of the time, "day trading" means buying and selling stocks during the day so that you don't have any shares left over at the end of the day. You sell as many shares as you buy. The difference between what you bought and what you sold it for is how you make money.
The main reason to trade this way is to make money every day so that you don't just sit on the shares, and you also avoid the risk that the shares will lose value overnight. This way of trading is meant to reduce the risk of holding a position overnight, when the open price may have changed a lot from the closing price of the previous day.
The NASDAQ said that a person is a "Daytrader" if he or she makes more than four buy and sell orders in a five-day period.
Before the year 2000, it wasn't unusual for the best Daytraders to make more than a million dollars in a single day.
People were "told" what to buy and when to buy it in dozens of Daytrading Chatrooms.
There were more than 500 people in some Chatrooms.
And as many as 99 percent of day traders are thought to have lost their shirts.
One reason they lost everything is that they were able to trade on Margin.
When you trade on margin, the brokerage firm that helps you make trades will lend you up to 5 times the amount you put in.
So, if you had $10,000 in your trading account, you could sometimes use $50,000 to trade.
But if you lost on your trades, you had to pay back right away.
DayTrading has gone out of style and out of reach since the heyday of the dot-com boom in the year 2000.
Most brokerage firms have gone out of business or merged, and the remaining firms have cut their staff by about 80%.
Trades that used to cost $35 to do now cost as little as $4.-
At first, it happened because President Bush talked down the economy and Mr. Greenspan kept raising interest rates until they were so high that the Market lost all hope.
Up until now, there were Stocks, mostly Internet Stocks, that went up by more than 30% in the morning and then went down by the same amount five minutes before the market closed, so people could make money.
As a DayTrader, if you were smart, you could make a lot of money.
Also, you could lose a lot of money.
Those times are long gone.
There aren't many days when the price of a stock goes up or down by more than 30%. Because of this, the profit potential isn't as high, and you can't catch as much of the price increase.
One reason is that Internet stocks, which used to be way overpriced, are no longer overpriced and have actually gone up much less than any other type of stock.
Another reason is that there aren't many IPOs, and even Google's IPO took a long time to take off.
If it weren't for how well Google did, Internet stocks would have lost more than 8% in 2005.
Even eBay's worth went down by more than a quarter.
DayTraders can still make money if they are smart, but it's not easy.
When a company makes a car that runs on water, what do you think will happen?
You could make a lot of money if you knew about this company very early on.
People don't often know that you can start trading on the NASDAQ Stock Market at 6 AM.
So, if you are a Stock Market News Hound who likes to get up early and has steel nerves, you could buy the stock at 6 AM and sell it to everyone else at 9:29 AM, when the regular trading day begins.
The fact that there is exciting news will not happen very often.
But if you wait a month, it might happen again.
