What is day trading?

Day trading is when traders place trades on financial markets using technical indicators that try to predict where the price of an asset will head over the course of a day. They place orders depending on where they think the price will go, and sell their positions when in profit or to prevent further losses.

Day trading gets its name from stock trading. Stock exchanges have trading hours that are set over the course of an exchange’s day, meaning traders can analyse the markets and try to predict where prices will go. The London stock exchange for example has trading hours on weekdays between 8am and 4:30pm (UTC), with the exchange closing over the weekend. This is fairly typical for stock exchanges, with the New York stock exchange also applying the same trading hours (adjusted for New York’s time zone).

The term is also loosely applied to assets like cryptocurrencies. Because crypto exchanges are open 24/7 and are not restricted to trading hours like stocks are, traders are able to be more flexible in how they define their trading day. As different time zones across the world “wake up” and begin trading, varying levels of liquidity can be expected across a 24-hour period. This is a consideration that stock traders don’t need to make and a reason for some of the higher levels of price volatility seen in crypto markets.