What is day trading and what does it do?
Day trading is a style that is often used to trade short-term price movements in an underlying market. People who prefer day trading will open and close multiple positions in a single trading session, usually in reaction to daily news or events affecting the markets.
Day traders often prefer greater market volatility because it means a market can see more price movements in a shorter time frame, offering better earning opportunities. In general, markets are more volatile during opening and closing times.
Day traders don’t leave their positions open overnight, so they don’t pay overnight funding fees. They should, however, follow the markets more closely and take steps to manage their risk exposure in case the market moves against them.
As with swing trading, you can use CFDs to practice day trading. These derivatives offer day traders the ability to take advantage of bull and bear markets, which can help you maximize your exposure to opportunities in a single trading session.
You can trade daily on any market, but the most common are Forex, stocks and indices. Forex is particularly popular due to the wide variety of currency pairs and its inherent high liquidity, which facilitates the quick opening and closing of positions.
When trading Forex by day, you will likely have to pay several spreads throughout the day. For this reason, it is important to be aware of pips. In Forex trading, a pip movement represents a change of one digit to the fourth decimal place. So, if the price of a Forex pair rises from 1.2500 to 1.2501, there has been a movement of pips. Forex pips are used to calculate the buy-sell spread for a specific pair and reflect profits and losses.
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