Technical analysis: Focuses on past prices and trading patterns to predict coming trends.2

Momentum trading: Capitalizes on short-term trends and reversals to capture quick gains.3

Unlike long-term investors, day traders are less concerned with the fundamental value of the securities and more focused on capturing immediate gains from market fluctuations.

How Does Day Trading Work?

Day trading, a high-stakes approach to the financial markets, involves the rapid buying and selling of securities within a single trading day. This frenetic form of trading works by capitalizing on small price movements in highly liquid stocks or other financial instruments. Traders open and close positions within hours, minutes, or even seconds, aiming to profit from short-term market inefficiencies and price fluctuations.4 This differs markedly from traditional "buy and hold" investment strategies, as day traders rarely maintain overnight positions, closing out all trades before the market shutters. The table below highlights the major differences: