Day traders, Financial Management

Day Traders

Day traders are basically the market markers. They create liquidity in the market by frequently buying and selling stocks throughout the day in the hope that the price of the stocks will fluctuate so that they can make profits with that fluctuation. Most traders buy stock and want the prices of a stock to rise so that they can make a profit, but some have alternate arrangements by following short selling of stocks to profit when their prices fall and purchase again at lower prices to make profit.

Day traders hold stocks anywhere from a few seconds to a few hours but at the end of the day they will always setoff their position before the stock exchange's normal closing time. They specifically control their activity to avoid risks arising from events happening after closing hours of the market. If they carry over the stock for next day they would be at risk of losing out on their gains due to negative news inflows on stocks, sectors or the markets. Therefore, the objective of the day trader is to benefit from frequent purchase and sale activities of any underlying stock in a particular day.

Day traders are further categorized into two different groups: (a) scalpers, and (b) momentum traders.

Scalpers: This group of day traders trading is like playing hot potatoes. Their activities are limited to the rapid and repeated buying and selling of a large volume of shares during a very short period of time, anywhere from a few seconds or a few minutes at a time. The group trades on those shares that have high liquidity and momentum in prices. New listing of shares is one kind of example where Scalpers are active. Their objective is to earn a small per share profit on each transaction at a minimum risk.

Momentum Traders: These types of day traders identify and trade stocks that are moving in a particular range during the day. Their objective is to buy stocks at the bottom and sell them at the top or vice-versa.

 

Posted Date: 9/10/2012 6:07:29 AM | Location : United States







Related Discussions:- Day traders, Assignment Help, Ask Question on Day traders, Get Answer, Expert's Help, Day traders Discussions

Write discussion on Day traders
Your posts are moderated
Related Questions
Rating Elements A rating agency earns its reputation by assessing the client's operational performance, managerial competence, management and organiza

Swing Traders Swing trading is more or less similar to day trading except that swing traders will normally have a longer holding period during a working day. Swing traders also

The consolidated income statement for AB Group for the year ended 30 June 2010: (all amounts in the workings are in $000, unless stated otherwise)

How do we estimate expected incremental cash flows for a proposed capital budgeting project? We valuate expected incremental cash flows for a proposed project by valuating the

Question: (a) Describe the Interest Rate Parity Theory. (b) A company needs to pay in 3 months USD 1 million. The USD are already at disposal in the company, thus the c

1.  Discuss the various techniques of cash management for an efficient working capital Management. 2.  Discuss the MM Hypothesis of Capital structure and its importance in corpo

Question: a. Le Mustang company Ltd is foreseeing a growth rate of 15 per cent per annum in the next three years. It is likely to fall to 12 per cent in the fourth year. Afte

(a) Presume we have a portfolio of n names with some default correlation ρ . The risk of the complete portfolio moves according to the change in default correlation. Alternative

Differences in working capital for different industries   Manufacturing Retail Service Inventories H

What is an agent? What are the responsibilities of an agent? An agent is a person who has the actual or implied authority to act on behalf of another.  The owners whom the agen