A day trader is a trader whose time horizon for trades is intraday, often for as little as a few seconds, but generally anywhere from a few minutes to an hour.
Day traders attempt to capitalize on significant intraday price movements and volatility by executing multiple quick trades that capture some part of the overall price movement.
How a Day Trader Trades
While there is no set playbook, day trading strategies share some common characteristics.
Day traders are less concerned with understanding the fundamentals of what they are trading, though this knowledge does help, than they are with applying a universal understanding of basic price action mechanics to stocks and other securities that are exhibiting a high degree of intraday volatility and volume.
This allows day traders to identify familiar patterns to intraday price movements, and make quick bets on upcoming rapid price changes.
For example, many day traders will wait for the release of scheduled relevant news, and then quickly take a position based on how they think the market will react to the news relative to expectations of the news’s content or make decisions based on how the price action is behaving.
Another common day trading strategy is to identify a strong price trend, and then buy or sell whenever the random noise of price movement moves against that trend, as a subsequent correction back toward the trend is likely.
There are as many day trading strategies as there are day traders. However, all day trading strategies do share some common features. The most important factor to a day trader is the existence of price volatility and trading volume, so that day trading strategies in general will be effective.
From there it is up to the individual day trader and the specifics of that security’s intraday price action to determine exactly how the day trader attempts to profit through trades.