Day traders, Financial Management

Assignment Help:

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.

 


Related Discussions:- Day traders

Explain briefly the term e-billing, QUESTION (a) Describe briefly three...

QUESTION (a) Describe briefly three methods of electronic payment. (b) (i) Explain briefly the term E-Billing. (ii) Outline three advantages of E-Billing. (c) Why is c

Determine the objectives of the firm, Determine the Objectives of the Firm ...

Determine the Objectives of the Firm Objectives of the Firm - Profit Maximisation and Wealth Maximisation To put it simply, we may say that goal of any business is to max

What is certified financial planner, Q. What is Certified Financial Planner...

Q. What is Certified Financial Planner? Certified Financial Planner (CFP) - Individuals who are trained to develop and implement financial plans for businesses, individuals and

State the term - redemption, State the term - Redemption Redemption is ...

State the term - Redemption Redemption is repayment of debt security at or before maturity.  Redemption could at par or at a premium to face value. A debt security will be rede

Balance sheet equation concept, Balance Sheet Equation Concept The His...

Balance Sheet Equation Concept The Historical Cost Concept needs support of two other concepts for practical reasons, viz. (i) The Money Measurement Concept (already discus

Margin and marking to market, The collaterals used in the repo market...

The collaterals used in the repo market are high quality securities; but they are also not free from credit risk. In our earlier example, we see the dealer borrow

APR and EAR, Assume a bank charges a 15.5% APR (annual percentage rate) on ...

Assume a bank charges a 15.5% APR (annual percentage rate) on credit card holder compounds quarterly. What EAR (effective annual rate) is the bank is charging? What if they change

Capital budegting, SCL Limited a highly profitable company is engaged in th...

SCL Limited a highly profitable company is engaged in the manufacture of power intensive products.

Illustrate report on cash flow budget, Q. Illustrate report on cash flow bu...

Q. Illustrate report on cash flow budget? The cash flows The principal reason why certain statistics were not included in the cash flows is that they are incremental cash

Securities, Calculate the expected rate of return and risk of return

Calculate the expected rate of return and risk of return

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd