Day Trader

Before explaining the concept of ‘Day Trader’, as well as the advantages and disadvantages of the professionals who are dedicated to it, it is necessary to understand what the trading system means. The ‘trading’ refers to the operations that are carried out in the financial capital markets.

The operators of ‘trading’ (known as ‘traders’), usually, usually intervene in financial markets with a very short time horizon. In fact, sometimes the purchase transactions are usually made in the same day, which is why these stockbrokers are known as ‘day-traders’. Thus, ‘day-trading’ refers to those operators who, in the same day, buy and sell various financial securities in the securities markets (whether stocks, bonds, etc.).

There are several advantages of operating through day-trading. The first one is related to the possibility of operating different market segments, making the ‘trader’ considerably less dependent on the general trend of the same. Another important advantage is to practice trading on indices, causing a formidable reduction in risk. In addition to lower risk, the day-trader supports lower transaction costs if it operates in the derivatives markets. Finally, we must not forget that the tax treatment for day-traders is much more favorable.

With regard to the disadvantages of operating in the capital markets through day-trading, it is worth mentioning what in Anglo-Saxon terminology is known as the ‘intraday’ risk, that is, a very pronounced type of risk that is caused by the excessive speed when operating securities in a single day. Another disadvantage for the ‘day-trader’ has to do with an excess of leverage, which can cause the loss of the investor’s equity. Finally, commissions are another negative element to take into account, as well as the risk / gain ratio, which generally is lower than in the rest of the stock market operations.

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