QandAs: Finance

What is a Day Trader?

Answer:
A day trader is an individual who buys and sells stocks rapidly throughout the day with the goal of making quick profits.

Stocks may only be owned for just a few minutes – even seconds- before being sold. As stocks rise and fall in value during the day, the day trader is quickly cashing in or buying according to the fluctuating price.

The day trading profession is extremely risky. While many day traders have made significant sums, many have been devastated financially due to the risky nature of the task.

The NYSE and the NASD have specific rules for day traders including requiring those who they have deemed pattern day traders to have a minimum of $25,000 in their accounts. In addition, they require these individuals to trade using margin accounts. These requirements are in place to protect the organizations from default.

While day trading may look attractive on paper, many organizations estimate that 80 to 90 percent of day traders lose money. If day trading sounds appealing, think of it as a gamble before jumping in. Only risk money you can afford to lose. In addition, because you may be required to trade using margin accounts (borrowed money), you could end up in debt or over your head.


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