What Is A Day Trader?

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  • 08 Feb 2023

Typically, a day trader rides on the small changes in stock prices during the course of the day to earn profits.

What is the basic difference between a day trader and an investor? A day trader reaps benefits from the day-to-day price fluctuations of the stock purchased. Meanwhile, an investor is concerned with the long-term growth opportunities of the company itself. So, the investor holds on to stocks with potential till they are realised. A day trader is considered to be a speculator, which is taken to be a negative attribute in the financial world. Investors, on the other hand, are considered strategists.

Read more: Is intraday trading profitable?

There are primarily two types of day traders:

1.Institutional Day Traders:

This kind of day traders works for financial institutions. They have access to high-end resources like expensive trading software, direct link-up with stock exchanges and data centres, and large financial backup. They also get the support of dedicated team members for the daily trading activities.

2. Retail Day Traders:

The day trader could service futures, forex, and stock markets Retail day traders work on their own or in partnership with other retailers. They invest their own money; therefore, the cash flow is usually tight.

Like everything else in life, day trading, too, has its good and bad aspects. Here is a list of the pros and cons of day trading:

Pros Cons
If a day trader can afford to take the risk, they can make good money from the market.
As day trading involves a lot of financial risk, it induces severe stress in the day traders themselves.
A day trader is not committed to any position; so, they can sell their stocks whenever they deem fit.
Day trading is an expensive affair as a day trader needs to employ a number of screens with expensive software.
There is scope for windfall gains.
There is also scope for huge losses.

Day trading is a hard taskmaster: one needs to woo it with great discipline. That means discipline in following the principles and strategies, and also in personal work ethics. Only a disciplined person can win at the game of stocks.

Read more: How to do intraday trading

There are no specific markets for day traders. Both day traders and investors could work in the same market because their end goals are so vastly different. The day trader could service futures, forex, and stock markets .

  • The Stock Market:

This is probably the most popular market for day trading. Traders have great potential here and they can close in on their trades by the close of the stock market.

  • The Futures Market:

This is another popular avenue for day traders. Futures are an agreement between the trader and the seller of a commodity in the future. The trader earns profits between the time of agreement and the future time when the agreement ends. This market is comparatively less regulated as compared with the stock market.

  • The Forex Market:

This is the largest stock market in the world and it operates for the entire 24 hours of the day. Therefore, traders working in this market have a larger window to finish their day trades. In this market, currencies comprise the commodity for sale and purchase. Currencies fluctuate the whole day, giving more opportunities for profit-making. Traders buy and sell currencies to earn a profit in between. The entry cost in this market is also very low as compared with the stock market or futures market.

As a day trader, you can choose a market to trade in—depending on your financial standing, your trading systems and strategies, your interest and your personality. If you have a good financial backup, you can choose to enter any of the markets. However, if your finances are low, you can opt for the forex market, as that is cheaper when compared to the futures or stock markets.

Read more: Day trading for a living

Are you looking to start your journey as a day trader? Then open a trading account with Kotak Securities and explore the trading options available.

For instance, you could opt for the Trinity Account, which combines a savings account and a demat account with a trading account. If you already have a saving account with a different bank, you could choose the 2-in-1 trading account. This links your third-party savings account with a demat account and a trading account.

There are also customised products for non-resident Indians, foreign investors, and high-net-worth individuals. As you can see, there are many options to explore.

Read More: Day trading options

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