The simple definition of a day trade is a trade that is opened and closed on the same day. Day traders have no positions when they log off at the end of the day and don’t have to worry about overnight moves.

Some day traders hold positions for very short periods of time – minutes or even seconds. Others will hold a trade until it either hits a profit target or a stop loss level. And, others hold their position until just before the market closes if it is ‘in the money.’

The time constraints of day trading mean traders only buy or sell an instrument if they are fairly certain it will do what they think it will do before the end of the day. This means supply and demand are the most important characteristics of a market. Fundamental analysis is of limited value to day traders, and most use some form of technical analysis or ‘tape reading.’

Day traders have to know their chosen markets intimately and understand who the different players in the market are, how they are positioned, and how they are likely to react to price movements.

Some day traders do trade forex successfully, but a lot of forex traders prefer slightly longer timeframes. The big difference between forex and other markets is that forex markets are open around the clock. However, different currencies are more active at different times of the day, so day traders need to decide on their preferred currency pairs and the time of day they will trade.

Forex trading requires a good understanding of both charts and economics – in particular, interest rates and what affects them.