what is the difference between interday trading and
intraday trading?
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Answer Posted / zia
Intraday trading refers to opening and closing a position
in a security in the same trading day. This can be buying
and selling to capitalize on a potential rise in a
security's value or shorting and covering the short to
capitalize on a potential drop in value. Intraday traders
capitalize on small moves in the value of a security by
using "leverage" or "margin", which basically means
borrowing money. Most day trading accounts are allowed to
take an initial position in a security that is 4X the value
of their account (per securities regulations), but some
professional accounts get more leverage (i.e. 10X). For
instance, a day trader with $10,000 in his/her account can
take a $40,000 position in a security for day trading
purposes. This amount is not allowed to be held overnight
(only about 2X the value of the account can be held
overnight per securities regs). The leverage inherent in
day trading allows small gains in a position to yield
meaningful profits (and losses). Most day traders are very
strict about cutting losses with "stop loss" orders. This
limits the potential downside (but not the upside) on any
particular trade, hence the adage "cut your losses short
and let your profits run". With this basic strategy, a day
trader can be wrong on 50% of his/her trades and still make
good money. Day trading styles vary from "scalpers", which
take positions for only a few minutes, to holding a
position for most of the day. Some day traders are momentum
followers and jump onto any given move, while others try to
identify intraday reversals. Virtually all day traders use
technical analysis (stock charting) heavily in their
decision making.
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