Day trading is a strategy used by spread betters and traders to profit from share price movements over and during the course of a day.
The simple premise behind trading is that no trades or positions are held overnight – trades are closed before the markets close.
Understandably, this is a very short-term strategy but can vary in terms of duration. For example, you could open a position at the start of the day and close at the end or you could enter at a certain point of the day say 1pm and close your position by 2pm.
A key benefit of this type of trading is that you know exactly where you stand – there is no agonizing wait to see if you’ve made a profit (as you will know during the course of the day).
But on the negative side, if you are trading frequently over the course of the day, you could see your returns severely impacted by wide spreads on your bets placed.
It’s a bit like buying and selling shares on a daily basis – you will be hit by dealing charges for each trade. But in the case of day trading, the costs you will incur are related to the spread levied by your provider.