Day Trading

Synopsis

Financial securities, financial commodities and other such fungible items are traded in financial market. Transaction costs are comparatively low in such market. Moreover, prices of these items reflect their supply and demand as well. In financial securities, items such as stock and bonds are usually included. On the other hand, precious metals or agricultural products are part of financial commodities.

Economics however, defines market as aggregate of sellers and potential buyers of a specific item or certain service and transaction that takes place between buyer and seller. It means there are three main components to form a complete market body. Those are sellers of the item or service, buyer of the item or service and transaction that take place between these two parties. Such transactions usually involve exchange of a particular item in return of money, or other item / wealth. However, sometimes term market is used strictly to refer exchanges or organizations that work in order to facilitate trading of financial securities or financial commodities. Various stock exchanges and commodity exchanges are great examples of such organizations. These organizations can either be physical or electronic systems. Examples of physical locations are NYSE, BSE and NSE. They can also be electronic systems without any physical existence and NASDAQ is the greatest available example for demonstrating such system. Most of the trading related to stocks and bonds usually take place at exchange. However, corporate actions such as merger and spinoff take place outside or without a stock exchange. Moreover, if one company decided to sell their stock to other one with their agreement, there will be no requirement for stock exchange in such initial transaction.

Most trading of currencies and bonds are usually based on bilaterally. There are still many people who prefer to use stock exchanges as medium for trading, buying and selling stocks. On the other hand, there are also some people developing electronic systems that serve the same purpose as a physically existing stock exchange does.

Day trading is an important concept or say component of stock exchange and trading. In upcoming chapters, various aspects related to this concept will be covered with deep details.