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Definition: Day Trading

Day trading is the buying and selling of a financial instrument (stock, currency, future, option, etc., etc.) on a daily basis.

True day trading involves the opening and closing of a position on the same business day. For example, a day trader can buy a stock at 10:00 AM Eastern Time (half an hour after the United States stock market opens) and then sell it an hour later.

The number of transactions that a day trader executes during a single trading day depends greatly on the trading style or system that the trader is using as well as the behavior of the market on that particular day (if the market frequently moves up and down on a consistent basis, this will generate more transactions or trades in general).

Although the trading of stocks is still the most popular form of day trading in the world, restrictive regulations during 2001 have caused many traders to flock to other markets like the forex (foreign exchange) market. This is a reason why many traders are now actively trading currencies rather than stocks.

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