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Day trading system is identified as the buying and selling of a stock in a single trading day. Typically, day traders have two major functions within the market place. First, they make sure the market is running efficiently through arbitrage. Second, they provide most of the market’s liquidity.
There are two distinct classifications of a trader in a day trading system, those who work independently and those who work for a firm or larger institution. Most professional traders work for a firm in a day trading system. These traders have the advantage over independent traders, because they easily have access to a dealing desk, huge amounts of capital and leverage, and expensive analytical software. These traders are most likely to involve themselves with easy profits from arbitrage opportunities and news events. Because of their wealth of resources, they are able to make less risky trades before independent traders can even respond.
Independent traders, on the other hand, often manage and trade with their own money or sometimes with others. Very few of them will have access to a dealing desk but oftentimes have access to a brokerage and other resources. However, because of their limited assets, they are not up to par to compete with institutionalized traders and often have to take more risks in order to make money.
The day trading system requires a trader to have access to a trading desk, which provides instantaneous order executions. These are usually reserved for traders who work for a firm and with large sums of money. It is also imperative to have access to multiple news sources like Wall Street and Dow Jones Newswire. Lastly, analytical software is the most expensive but useful tool that a trader can have. It provides them with much leverage, but because of its cost, independent traders usually do not have access to such.
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