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What is daytrading?

This article is an abstract of the book:
The Complete Guide to Daytrading

It is important to understand the difference between position trading and daytrading. Position traders follow the classic buy-and-hold strategy. They buy (or short) a stock for the long term. A trade may last for several days or several years, consequently the position trader doesn’t make many trades because his money remains invested most of the time.

Daytrading the stock BEAS

The position trader profits from big market upswings that occur in a booming market, but he can also suffer big price declines in a bear market. His profit or return is the average price increase of his stock investments. He isn’t concerned with smaller upswings or downswings that may occur during a trading day.

A daytrader, however, uses a different approach to trading. He looks for interesting price oscillations that occur during the trading day and is content with much smaller profits than a position trader. His aim is to make smaller profits but much more often. Daytraders usually make more trades in a single day than a position trader may make in a month or even a year.

Some daytraders make up to several hundred trades a day, thus providing the market liquidity. Have you ever wondered who is buying when a stock is plunging fast? Daytraders (and of course market makers). Daytraders are responsible for almost one third of the NASDAQ’s volume. They also help to narrow the spread significantly because they are able to split the spread by using new sophisticated private order execution networks.

Immediate fills with a direct access trading platform

Whereas a position trader tries to make several points profit with an investment, the average profit of a daytrader is usually between 1/4 - 1 point. What he tries to do is make this profit several times a day. Usually a daytrader doesn’t hold positions overnight; instead he ends flat each day. So, every profit or loss a daytrader makes is for real because he liquidates all his positions by the end of the day.


Normally we can say the narrower the time frame you are operating within, the smaller the profit. “Scalping” a stock means to go in for a very limited profit in an extremely short time, usually a few minutes or even seconds. Scalpers look for an eighth of a point here, a quarter of a point there, hoping to make small gains as often as possible. In higher priced or fast moving stocks, one point can also be considered a scalp.Scalping often doesn’t pay if you trade with less than 1,000 shares, unless you try to scalp fast moving stocks. A 1/8 point profit is 1,000 x 1/8 = $125 profit, minus commission. You must be an experienced trader if you are trying to scalp stocks because holding 1,000 shares of a stock can be very risky if the trade goes against you. Therefore, the motto of a scalper is: Fast in and fast out with a small but “sure” profit.

 Trend traders

Some traders don’t scalp, but rather they look for a profit of at least a 1-2 point in a particular trade. They may be in a trade for a few minutes or as long as an hour. They make fewer trades than scalpers, but seek higher profits per trade. Often a share size of much less than 1,000 shares is enough to make a nice profit if you are a trend trader. If you are looking for far more than a one point profit in daytrading, you must consider holding for several hours, unless the stock is moving fast or it’s a high priced stock. The advantage with this is you can make a good profit with a smaller number of shares.

 Share size

The amount of time a trader is involved in a trade, the quantity of shares he uses and the amount of profit he makes, depend on many different factors. A fast moving stock promises a greater profit in a short time but also involves a higher risk. Larger share sizes (1000 shares or more) bring greater profits but also higher losses if the trade goes against you. You can make serious money with a share size of 200-500 shares.

A daytrader must be able to weigh up all these considerations and control the risk. Being in constant control of the risks is the most important part of being a daytrader. If you don’t know exactly what you are doing, the money will flow out of your account very quickly. On the other hand, you can make a considerable profit if you are self disciplined and stick to the rules.

It can take months before you become a successful trader, during which time you can make several thousand dollars or you can lose money every day, or even with every trade. To make a living, however, you do not need to take big risks. Most daytraders believe they need to trade the fast moving stocks to make big money, but they usually lose money faster than they can make it. On the other hand, you can make serious money by trading slower moving stocks or lower priced stocks which are easier to control. If you focus only on high percentage trading opportunities, you will consistently make very good money, which is why we operate that way at Alert-Trading.

Daytrading is a profession and a serious business. You must take it seriously if you want to succeed in the long run. Nobody out there will give you their money voluntarily. You must fight for it, and the better you are prepared, the better your chances of success. You must do your homework, learn the rules, train yourself to recognize the patterns and become experienced in order execution. This book will give you a comprehensive overview of everything you need to get started. It covers all areas of daytrading and will guide you through all the necessary steps. It offers much more than most other daytrading books because it also teaches you a working trading system. It delves deep inside the trading process and shows what is needed to make a successful trade.

This book is not written by theorists but by actual daytraders. Take a look at the Alert-Trading chat room. There you can see traders trading live using the style and system described in this book. You can join the chat room during market hours and see with your own eyes that the methods described in this book really work. You can learn a lot from others while improving your own trading skills. You will also learn to keep focused on the high percentage trades and to stick to the rules.

This book is your first step towards successful trading. It will help you get started. Read it carefully. When you are ready, join the chat room and let’s trade together!


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