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Stock Market Day Trading

Stock market day traders buy and sell stocks via stock exchanges such as the New York Stock Exchange (NYSE) within the same trading day so as to close all positions before the market close of the trading day. Depending on the day trading strategy of the particular trader there may be several to hundreds of orders a day.

In the past day trading was a privilege of financial firms and professional investors and speculators. However, nowadays, the electronic trading and margin trading have made day trading popular among casual traders too.

The type of stock market day trading that most traders practice, is buying stock, and then selling it after its value increases to take the profit (this is also known as buy and hold trading). Stock market day traders also make a profit out of the decrease of a stock's value - they sell it, wait for it to decrease and then buy it again but this time at a lower price (this is also known as shorting a stock).

Often, day traders borrow money to trade (this is known as margin trading), hoping that this way they will reap higher profits (though this brings the risk of higher losses too).

Stock Market Day Trading Restrictions

Though stock markets provide some nice opportunities for day trading, they also have certain characteristics that make them unsuitable for beginning day traders.

For instance, the US Securities and Exchange Commission (SEC) requires that pattern day traders have deposited at least $25,000 in cash or securities (this may include stocks, options, futures contracts) with their brokerage in order to be allowed to day trade. A trader is classified as a pattern day trader when 4 or more day trades are executed within 5 trading days. If the pattern trader hasn't made the required $25,000 deposit, his or her trading account will be frozen for a period of 90 days.

Have in mind that these restrictions apply only to the US stock markets. They do not apply to the US futures and currency markets, or to the European and Asian stock markets. Thus, beginning day traders who do not have a $25,000 deposit can start with these markets.

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