What is a Day Trader?

A trader who buys and sells financial instruments such as stocks, options, currencies, futures, derivatives and other types of instruments related to finance is called a day trader. All this is done in one single trading day. This is because all the positions will be filled and closed before the market closes for that particular trading day. This kind of trading is called as day trading and the person who does this trading is called a day trader. Here trade strategies are very important and knowledge related to it is also very much required. Depending upon the strategy the trade may range few to hundreds of orders a day. This kind of dealing generally happens with the stock market as the market changes from day to day depending upon the success of various business strategies and people who manipulate these in the correct way are paid off well.

Types of Day Traders

There are various types of day traders. The major two are institutional and retail. In case of institutional trading the trader works for a financial institution. These kinds of traders have an added advantage as compared to retail traders. They generally have more access to resources, tools, equipments, large amount of capital and leverage, large availability of fresh funds that inflow into trade continuously on the markets. They also get dedicated and direct lines of data centers and data exchange. These are generally very expensive and this involves high end trading and cannot be afforded by retail traders.

This also involves expensive analytical software which helps in supporting teams and also helps them in improving their strategies and more. All these numerous advantages help them be a better and sophisticated trader as compared to retail traders. A retail trader is a trader who has his own small shop or who is a partner in a small shop or company in collaboration with a few other traders. This is all only in small scale. This type of traders generally trade with their own money or they might also use other people's money too. This involves only a small amount of money.

According to the law, there is a restriction on the amount of money which a person can borrow on the name of retail trading. In Canada, traders are not allowed to market themselves as financial advisors or financial managers. Most of these Canadian traders use brokers that are easily accessible although these brokers are not required in general. They offer the fastest order in terms of entry and data exchanges. They also provide platforms for trading of superior software. This is one of the advantages of using a broker as they will have an idea of the intricacies of the market. Initially most of the traders used to be institutional day traders due to the various profits and added advantages as compared to retail traders. Now due to the advancement in technology people have started setting up their own computer software companies in Canada. This has led to an increase in the retail traders.