Day trader

A day trader is a trader who adheres to a trading style called day trading. This involves buying and subsequently selling financial instruments (e.g. , options, futures, derivatives, currencies) within the same trading day, such that all positions will usually be closed before the market close of the trading day. Depending on one's trading strategy, it may range from several to hundreds of orders a day.

There are two types of day traders: institutional and retail. Both institutional and retail day traders are described as speculators, as opposed to investors.

Institutional day traders work for financial institutions and have certain advantages over retail traders due to their access to more resources, tools, equipment, large amounts of capital and leverage, large availability of fresh fund inflows to trade continuously on the markets, dedicated and direct lines to data centers and exchanges, expensive and high-end trading and analytical software, support teams to help and more. These advantages give them certain edges over retail day traders.

Retail day traders use retail brokerages and generally trade with their own capital.

Auto traders use of computer programs and other tools to enter trading orders automatically. Because this all happens with the help of the computer algorithm, it is also called algorithmic trading.

Day traders' objective is to make profits by taking advantage of small price movements in highly liquid stocks or indexes. According to Adam Leitzes and Josh Solan (Bulls, Bears and Brains: Investing With the Best and Brightest of the Financial Internet), the more volatile the market, the more favorable the conditions for the day trader, regardless of the longer-term direction of the trend in the market. Unlike some fund managers and investors, who hold positions over longer periods of time and are averse to selling equities short, the day trader is not committed to a position and can adapt himself to whatever condition the market is in at any given moment.

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