What’s day trading?

Day trading consists of direct opening and closing of stock positions on major stock exchanges, using a computer on the trading floor of a branch of a day trading company, or using your home or company computer to access an internet broker. The keyword in this definition is direct. Day trading gives traders direct electronic access to NASDAQ market makers or NYSE specialists.

Market makers are NASD brokers and dealers who buy and sell NASDAQ shares for other people’s accounts and engage in the securities business for their own accounts. In essence, market makers are stock traders. One NASDAQ stock has multiple market makers who continue to trade the stock and create markets for it. One NYSE stock, on the other hand, is assigned one NYSE specialist. The role of the NYSE Expert is to maintain fair and orderly markets for their safety. Specialists can act as brokers, fulfill orders from other brokers or act as dealers in key positions when trading their accounts. Specialists rarely act as actors to maintain the marketability of stocks and counter temporary imbalances in the supply and demand of their securities.

Day traders don’t need a stockbroker. Traders do not use the telephone to call stockbrokers, and brokers do not pass their orders to the brokerage firm’s order desk. Clerks do not direct orders to market makers. Day trading companies eliminate them altogether. As a result, day trading companies have eliminated most of the costs associated with time dilation and brokers processing trade orders. Day traders are their own brokers and their order execution is fast and affordable.

Day traders simply enter stock symbols into a computer equipped with special trade execution software, press the appropriate function keys, and buy and sell stocks on major exchanges. The software used by day trading companies for order execution is relatively easy to use 7, providing an efficient interface between the stock exchange and day traders.