Day Trading Example

A day trade is exactly the same as any stock trade except that both the purchase of a stock and its sale occur within the same day, and sometimes within seconds of each other.

For example, say a day trader has completed a technical analysis of a company called Intuitive Sciences Inc. (ISI). The analysis indicates that this stock, which is listed in the Nasdaq 100, shows a pattern of rising in price by at least 0.6% on most of the days when the NASDAQ is up more than 0.4%. The trader has reason to believe that this is going to be one of those days.

The trader buys 1,000 shares of ISI when the market opens, then waits until ISI reaches a particular price point, probably up 0.6%. The trader then immediately sells the entire holding in ISI.

This is a day trade. Obviously, the merits of ISI as an investment have nothing to do with the day trader’s actions. A trend is being exploited.

What if ISI had bucked the trend and lost 0.8%? The trader will sell anyway and take the loss.

Similar Posts

  • The Basics of Day Trading

    Bysaif Gill

    Day trading is most common;y observed in the stock markets and on the foreign exchange (forex) where currencies are traded. Day traders are attuned to events that cause short-term market moves. Trading based on the news is one popular technique. Scheduled announcements such as the release of economic statistics, corporate earnings, or interest rate announcements are subject to market…

  • Access to a Trading Desk

    Bysaif Gill

    This is usually reserved for traders who work for larger institutions or those who manage large amounts of money. The trading or dealing desk provides these traders with instantaneous order execution, which is crucial. For example, when an acquisition is announced, day traders looking at merger arbitrage can place their orders before the rest of the market…

  • Discipline

    Bysaif Gill

    Many day traders end up losing money because they fail to make trades that meet their own criteria. As the saying goes, “Plan the trade and trade the plan.” Success is impossible without discipline. To profit, day traders rely heavily on market volatility. A day trader may find a stock attractive if it moves a lot…

  • Why Is Day Trading So Hard?

    Bysaif Gill

    Day trading is challenging due to its fast-paced nature and the complexity of the financial markets. It requires traders to make quick decisions based on real-time information, which can be overwhelming, especially in volatile market conditions. Traders must be adept at technical analysis, interpreting charts and patterns, and understanding how economic events influence market movements….