What Is Binary Options Day Trading?
Day trading is the practice of buying and selling financial securities, usually stocks and stock options, while opening and closing all positions within the same day. The people who engage in this practice are known as day traders. Day traders strive to take advantage of price fluctuations that occur throughout a trading session by buying securities at lower prices and selling them at higher prices. Day traders normally will take positions that are both long and short, often even taking both long and short positions on the same day. Day trading is almost entirely speculative, and not normally based on fundamental analysis. A strong understanding of how various factors affect fundamental price is useful to a trader though because news will come out throughout a trading session which can affect a traders positions.
Day traders usually enter into much larger positions (in terms of percentage of total account value) than a longer term investor might. This is because price fluctuations that occur during the trading session are typically smaller than those experienced over the course of months, but if a trader is able to enter into positions with large enough size, profits can be substantial.
Day trading used to only be available to the most sophisticated financial firms, because all market activity took place on the New York Stock Exchange, and a seat at the exchange had to be purchased by the trader in order to understand the current price action of a stock. As computer technology advanced, data feeds improved to allow for wider access, but the true trading revolution occurred in 2007. This is when stocks were allowed to trade over electronic exchanges in addition to being traded on the New York Floor. This market state is known as the hybrid market, and it is how the market exists today.
The advantage of the hybrid market is that it has never been easier for a trader to access the stock market from virtually anywhere. All a trader needs is a computer with a reliable internet connection, and he can receive all the information he needs in order to spot and execute trades on a professional level.
Professional day traders use more advanced trading software than one might find at most online brokerages, because they need access to all the information they possibly can. Unknown to most people, a stock might trade in over 10 different public exchanges (known as light pools) and possibly dozens of dark exchanges (known as dark pools). Because being profitable for a trader comes down to getting in and out of a position at the best possible price, it is of therefore of supreme importance that he knows exactly where and how stock volume is transacting. Without access to the best software and data feeds, this is not possible.
Professional day traders also often use something called leverage, or margin, which can be provided by their broker. Leverage allows a trader to enter into positions much larger than his account value, and increases profits significantly. For a trader to make large profits from small price movements, he wants access to the most leverage he can get because he knows the larger the leverage, the larger his profits, as long as he has a reliable system for trading profitably.
Day trading is a risky career, but it is also a highly profitable career, with successful traders often making millions of dollars a year.