A person known for purchasing as well as selling instruments related to finance (e.g. currencies, derivatives, stocks) is known as a day trader. The offers are closed with the end of that specific day and they come up with new offers the next day. Unlike a stock investor the day trader does his purchasing and selling on pc for a few hours but his position is closed in stocks with the end of each trading day. A day trader should be well disciplined in dealing with the transactions and be efficient with time management. This kind of trading requires an individual with a pc where he or she can accomplish the trading single handedly. As one gets only a day to trade, the trader has to be quick-witted as every second of the day is crucial. Day trading requires a remarkable analytical skill and a mathematical approach, and at the same time the trader should be updated about the new regulations for taxes and trading fees. They are never affected by rapid rise or fall of financial indicators like DOW JONES and NASDAQ.
There are two broad classifications of day trading: retail and institutional. Generally the institutional day traders work under a financial firm or institute. This gives them an easy access to efficient tools, resources and equipments. They come across a substantial amount of leverage and capital to deal with. They are also provided with direct lines that connect to the exchanges and data centers which enable them to operate smoothly without delay or inconvenience. The institutions are known to offer their traders with expensive analytical software to perform their high end trading. For the betterment of the trading there is a remarkable flow of fresh funds to trade in the market simultaneously. So it is evident that an institutional day trader is in a much better position with the right resources than the retail day traders.
The retail day traders on the other hand either work alone an individual or partners up with other day traders. Unlike the Institutional traders, they usually trade in the market with their own money or at times with other’s capital. The financial laws and regulations may well have restricted the sum of other person’s money with which the day trading is to be conducted. Even if it is not mandatory the retail day traders use the direct access brokers as it is the only fastest way to get an entry in the exchanges along with a platform that consists of superior software provided for trading.
As it has been established that institutional day traders have certain advantages essential for day trading , most people were less enthusiastic about the retail day trading. But after the boom in the world of technology since the 90’s, traders could easily get hold of a high tech pc and fast internet services for online trading. This advancement in technology also provided them with the powerful tools for market analysis. The retail traders are also offered low commissions by brokers which makes their trading smoother and profitable. However there are a few regulations which need to be improved to favor the retail traders.