The day trader?s ultimate objective is usually to trade high-priced and volatile stocks on the NASDAQ and NYSE markets in in increments of 1,000 shares or far more, and profit from the small intra-day price movement. The day trader may possibly make several trades in a single day, holding onto stocks for only a couple of minutes (or hours), and virtually in no way overnight. Day traders are short-term cost speculators. They?re not investors, and they?re not gamblers.
Day trading is just not investing. The day trader?s time frame of analysis is rather short: 1 day. Their only intent would be to exploit the stock?s intra-day price swings or day-to-day cost volatility. Unlike stock investors, day traders don?t seek long-term value appreciation.
Stock volatility is normally a rule of the market rather than an exception. Most stock costs move up or down in any given day on account of a number of external elements. Even if the market is relatively calm, you will find constantly stocks that are volatile. Day traders seek to identify a stock that has a trend after which go with that trend. ?Trend is really a friend? can be a common motto amongst day traders. Day traders seek to choose up a reasonably small stock movement, 1/8 or far more on that stock. If day traders are trading a big block of shares (that is, 1,000 shares per trade), then day traders will profit $125 from a 1/8 price movement. Conversely, if a day trader acquired 1,000 shares and the trader was wrong, which also occurs, then the day trader will shed $125 from a 1/8 price movement. Volatility is a double-edged sword.
For costly stocks that trade for $100 or much more, a 1/8 or 12.five cents movement is such a modest relative price change that it happens all the time. Consequently you can find lots of day trading opportunities. It?s not common to see per day trader executing a lot of, often as many as 100, trades in a single day. However, an investor?s time frame is considerably longer. Investors seek a much larger cost movement than 1/8 to earn the desired rate of return. That takes time.
In brief, day traders seek to extract an income from intra-day price volatility by trading the stock regularly, while the investors seek a long-term capital appreciation.
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Source: http://advicearticle.net/day-trader-versus-investor/
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