What is Day Trading and How Has it Impacted Stocks?

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Day trading is when an individual trades stocks in high volume from home or from his or her own account throughout the day. Day stock traders are picking stocks to buy and sell or to short throughout the trading day, using market fluctuations, which are often idiosyncratic, to their advantage. This is very different than fundamental analysis on a company or on broader market behavior. It is sometimes referred to as speculative.

Day trading is also different from wealthy individuals or institutions who generally allocate money to professional money managers like mutual funds and hedge funds.

Platforms people use for day trading include Robinhood, TD Ameritrade, E*Trade, Charles Schwab, and Interactive Brokers.

Recently, the U.S. stock market has run up, partly because professional investors, with a lot of money to deploy, see a high likelihood of a fast economic recovery. Usually, markets are mostly moved by professional and institutional investors, while retail investors like day traders can’t match the institutions dollar for dollar.

But sometimes retail money moves the market, especially if institutional money isn’t being put to work or if tons of retail traders enter the fray at once.

The reality recently has been a mixed bag.

Between the end of 2019 and June 2020, there has been a more than 300% increase in Robinhood accounts holding the top 5 leaderboard stocks, according to data from both Robinhood and Glenmede, an investment manager.

Some have suggested this must be the main reason the market has continued rallying at such lofty price levels. But the reality is that institutional investors have also grown more bullish.

To see how that all breaks down, watch the quick video above. 

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