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Saturday, March 14, 2009

Day Trading

"Day Trading" refers to opening and closing positions within the same day. The markets do not fluctuate much over the course of a given day relative to their movements over longer periods of time. Therefore, day traders will look to use as much leverage as possible to magnify their exposure to those market moves that they can find.

Most day traders treat market speculation as their full- or part-time job. They see trading through the lens of a daily employment regiment, punching in at the beginning of the day and closing out any positions at the end.

Gift to the Markets
Day traders benefit the market by offering liquidity and efficiency. Markets operate best when there are active buyers and sellers at all times. With numerous day traders operating in the market for Euros and Dollars for example, a bank knows that when you exchange your travel money they can easily and instantaneously find a counter party to your exchange.

In terms of efficiency, any trader who has looked for any small arbitrage opportunities knows that few if any easily exist in markets, since day traders will take advantage of them the moment they appear.

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