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thinking of a day trader as just the hypermanic person sitting back making dozens of trades per day. |
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Defining Trading Approaches |
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According to the way one teacher of traders defines the word, I would be considered a day trader. Oliver Velez is the founder of Pristine.com, an educational service for active self-directed traders. He thinks of a day trader as anyone who is "committed to his trades and applies focus and attention to the market each and every day" (Keynote address at International Day Trading Expo, Ontario, California, September 25, 1999). |
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The interesting distinction Velez makes in his definition is that you don't need to be acting every day on your trades to be considered a day trader. Those of us who are committed and watching the market daily would thus qualify, under his definition, as day traders. If we accept this more inclusive view of the day trader, obviously a much larger number of investors would fall into this category than when defined more narrowly. |
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I offer this alternative definition because it has some psychological validity. When you think about it, perhaps the commitment to, and amount of time and attention put in, watching the market is a better criterion for defining a trading type than the number of trades executed in a specific period of time. |
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One reason Velez defines day trading this way is that he teaches a method that is called swing trading, in which a stock may be held from two to five days. The trader may be watching closely while in a position over a period of days but not necessarily taking any action on it. |
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Velez focuses on this period of time because he sees it as a market niche that may be taken advantage of by the individual trader. Since large institutions can't move quickly enough in this short period, they do not, he believes, pose any competition. Likewise, it's too long a period for those who want to be in and out the same day, so they aren't going to be the competition either. |
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Those practicing this style of trading, while they certainly fall under the category of short-term traders, don't fit the more common narrow definition, in which one doesn't hold a position overnight. For review, here are the typical types of traders: |
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1. Fraction traders. Also known as scalpers or grinders, they make numerous trades a day, looking to make fractional |
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