The definition of day trade is "The purchase and sale of a position in an account during the same trading day". A day trade may also be a short sale followed by a short cover also know as a buy.
A day trade refers to the practice of buying and selling financial instruments within the same trading day in such a manner that all positions will usually be closed before the market closes of that particular trading day. Traders performing day trade are referred to as day traders.
History of Day trade:
Day trade has its origins in the birth of the computerized, over-the-counter NASD, which occurred in 1971. Fourteen years later, NASD created the Small-Order Execution System, namely SOES, which made it easy for individuals to execute stock, trades automatically, as long as the orders were for 1,000 shares or less. Thus for day trade, with the use of phone lines, orders were placed in a matter of seconds, instead of minutes.
The modern day trade is no longer limited to SOES. Indeed, the most popular tool for the day trader today is the electronic communication networks, which are internal networks set up to handle groups of customers who make large blocks of stock trades. Thus facilitating all the members to trade directly with other members of their network, placing buy or sell orders electronically. Hence the electronic medium has become a big helping tool for day trade.
Divisions:
There are majorly two divisions of day trade performed by the traders: Institutional and Individual.
An institutional day trader, involved in day trade, is a trader who works for a larger institution. These type of traders have more advantages than individuals since it has more resources and also an access to different tools and equipment like the large amounts of capital and leverage, dedicated and direct lines to data centers and exchanges, expensive and high-end trading and analytical software, support teams to help, and much more.
Thus allowing them to forestall other day traders and minimize the high risks involved in Day trade.
An individual day trader, involved in day trade, is one who works for self. They generally work alone. An individual trader usually trades with their own capital, from loans, or obtains finances from others privately and manages their money.
Law has restricted the number of consumer's money an individual trader can manage. They are not allowed to advertise themselves as an advisor or financial manager. Nowadays nearly all individual day traders choose direct access brokers as they can offer fast and direct access to the exchanges, also offer better trading platforms.
Basically, day trade firms differ from long-established brokerage houses, and even online brokerage companies, in one fundamental way they offer their customers direct, electronic access to stock markets. Though a handful even offerthe traders of day trade real-time access, which means that the traders see the market just as it really is at that second.
Long-established brokerages work with the customer, then places the trade orders through middlemen, called market makers. The customer is never involved directly within the day trade, and it takes some time for the day trade to be completed. But in case of day trade, the customer is actively involved, and trades are completed immediately
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