Question of the Week: What is day trading?

We’ve got another reader question this week, asking about day trading. After seeing the term being used on an investors forum they frequent, they would like to know what it is and what it entails.

Day trading has become more popular over the years as the rise of online trading, and stock trading apps has made it easier for the average person to trade in the stock market.

Before we continue, please note that the Nova Scotia Securities Commission does not endorse or recommend day trading. We do not give investment advice, and provide the following information so investors have as much knowledge as possible when making investment decisions. When investing also take into account the risk involved and your own risk tolerance and do not invest money you cannot afford to lose.

Back to day trading. A day trader typically buys and sells a security in a single day. It is most commonly practiced in the stock, derivative and foreign exchange (forex) markets. Someone day trading will use high amounts of leverage and other trading strategies to try and make large profits on small price movements. To be successful at day trading, one usually has to be well educated, well researched, and well-funded.

As we do not provide investment advice we will not be closely examining the strategies and techniques used by day traders. If you do more of your own research into these strategies, be sure you know the inherent risks in day trading. Day trading get-rich-quick schemes are often used by fraudsters and scam artists to lure amateur traders into bad situations. Do not enter into day trading lightly, and as we’ve said numerous times already, do not take on more risk than you are comfortable with, and do not invest money you cannot afford to lose.