Usually the term ‘day trading’ is used to refer to buying and selling stocks on the same day. A day trader uses trading strategies to leverage large amounts of capital by taking advantage of small price movements in highly liquid stocks. One of these trading strategies is entry strategies. A day trader will usually look at the liquidity and the volatility of a stock to determine if it is ideal as a day stock. Liquidity here is the ability to enter and exit a stock while maintaining a good price on it. It thus needs to have tight spreads and low slippage. Volatility is the expected daily price range. If a stock proves to be more volatile it also means it has greater losses or profits.
12-31-2009