Rebate trading is an equity trading style that uses ECN rebates as a primary source of profit and revenue. Most ECNs charge commissions to customers who want to have their orders filled immediately at the best prices available, but the ECNs pay commissions to buyers or sellers who "add liquidity" by placing limit orders that create "market-making" in a security. Rebate traders seek to make money from these rebates and will usually maximize their returns by trading low priced, high volume stocks. This enables them to trade more shares and contribute more liquidity with a set amount of capital, while limiting the risk that they will not be able to exit a position in the stock.[16]
Suppose a trader employs scalping to profit off price movements for a stock ABC trading for $10. The trader will buy and sell a massive tranche of ABC shares, say 50,000, and sell them during opportune price movements of small amounts. For example, they might choose to buy and sell in price increments of $0.05, making small profits that add up at the end of the day because they are making the purchase and sale in bulk.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
Tactics used to take advantage of the uptrend can also be applied to trade the downtrend. Again, since it’s very difficult to predict exactly how long a bear rally, or “counter trend” may last, you should enter a bearish swing trade only after it seems that the stock has continued downwards. To do this, examine the bear rally very closely. If the stock heads lower than the counter trend’s previous day’s low, the swing trader could enter a bearish position.
Scalping can be very profitable for traders who decide to use it as a primary strategy, or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.
Fundamental analysis usually involves using a company's financial statements, discounted cash flow modeling and other tools to assess a company's intrinsic value. Scalpers may trade on news or events that drastically affect a company’s value immediately after its release. In some cases, they may also use short term changes in fundamental ratios to scalp trades but typically they focus mostly on the technical charts.

Commissions for direct-access brokers are calculated based on volume. The more shares traded, the cheaper the commission. The average commission per trade is roughly $5 per round trip (getting in and out of a position). While a retail broker might charge $7 or more per trade regardless of the trade size, a typical direct-access broker may charge anywhere from $0.01 to $0.0002 per share traded (from $10 down to $.20 per 1000 shares), or $0.25 per futures contract. A scalper can cover such costs with even a minimal gain.


There are two primary divisions of professional day traders: those who work alone and/or those who work for a larger institution. Most day traders who trade for a living work for a large institution. These traders have an advantage because they have access to a direct line, a trading desk, large amounts of capital and leverage, expensive analytical software, and much more. These traders are typically looking for easy profits that can be made from arbitrage opportunities and news events, and these resources allow them to capitalize on these less risky day trades before individual traders can react.
There is a commonly quoted statistic that only about 5 percent of day traders succeed. This is a good approximation. Most people who try day trading will not succeed, yet most of them do not practice everyday for six months to a year either. Time investment and quality practice increase a day traders chances of being in the 5 percent that are successful.
The intraday trading strategy to be used also depends upon the traders’ personal trading styles, along with being dependent on the market conditions. Some traders are very active and do many trades a day, with large position sizes, catching even the small price movements; while there are others who trade only on specific news events or only on tendencies that they have well researched.
The systems by which stocks are traded have also evolved, the second half of the twentieth century having seen the advent of electronic communication networks (ECNs). These are essentially large proprietary computer networks on which brokers can list a certain amount of securities to sell at a certain price (the asking price or "ask") or offer to buy a certain amount of securities at a certain price (the "bid").
In parallel to stock trading, starting at the end of the 1990s, several new market maker firms provided foreign exchange and derivative day trading through electronic trading platforms. These allowed day traders to have instant access to decentralised markets such as forex and global markets through derivatives such as contracts for difference. Most of these firms were based in the UK and later in less restrictive jurisdictions, this was in part due to the regulations in the US prohibiting this type of over-the-counter trading. These firms typically provide trading on margin allowing day traders to take large position with relatively small capital, but with the associated increase in risk. The retail foreign exchange trading became popular to day trade due to its liquidity and the 24-hour nature of the market.

The ability for individuals to day trade coincided with the extreme bull market in technological issues from 1997 to early 2000, known as the dot-com bubble. From 1997 to 2000, the NASDAQ rose from 1200 to 5000. Many naive investors with little market experience made huge profits buying these stocks in the morning and selling them in the afternoon, at 400% margin rates.
Day trading requires more money than just a deposit, though. Get setup with a good computer, one or two monitors, a trading platform and data feeds. With many brokers the data feeds for various markets cost money, so pick a market and stick with it. There is no reason to pay for data feeds you won't be using. Also, a consistent income isn't likely during the first six months to a year, so save up for living expenses if attempting to day trade as a primary income stream.

There is a lot of hype around day trading. Some websites promote it as a way to get rich quick (it isn't), and others say it is impossible (also not true). There are lots of day traders around the world who find success and make a living off the markets, so the truth lies somewhere in between those two extremes. If you've thought about day trading, it's worth your time to read through and understand the concepts discussed below, so you'll be better prepared for what to expect if you decide to proceed.
Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, which contributes to price volatility. A seasoned player may be able to recognize patterns and pick appropriately to make profits. But for newbies, it may be better just to read the market without making any moves for the first 15 to 20 minutes. The middle hours are usually less volatile, and then movement begins to pick up again toward the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first.
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