Day Trading

What is day trading?

Day trading is short-term, speculative trading in shares, currencies, futures or CFDs. Day traders open buy or sell positions and close them again within the same trading day, aiming to profit from daily price fluctuations. They hold no positions overnight.

The term describes a trader's whole approach: the daily routine, the choice of markets and the methods used. The time-frame aspect alone, i.e. the fact that each trade begins and ends within one session, is covered under intraday trading.

How day trading works

Day traders usually work with short-term charts, from the one-minute to the hourly chart, and concentrate on liquid markets with enough daily movement, such as major currency pairs, stock index CFDs or heavily traded shares. The day typically starts with preparation, such as marking key price levels and checking the economic calendar. Before the session ends, all positions are closed, so the trader is flat overnight.

Example: a day trader buys an index CFD in the morning after the price breaks above the previous day's high, places a stop-loss below the breakout level and closes the position in the afternoon, at the latest before the market closes.

Why it matters for traders

Holding no positions overnight removes the risk of price gaps between sessions, but day trading demands time, concentration and strict rules. A tested trading system is essential, as frequent trades combined with leverage can quickly lead to large losses.

Costs weigh heavily too: spread and commission are paid on every trade and, with many trades a day, take a noticeable share of the gross result. Some services refund part of these costs as a rebate per traded lot, so comparing broker conditions can affect the net result, although it does not change the risk of the trades. The fastest form of day trading is scalping.