Understanding Day Trading, from Market Research to Cost Efficiency
Day trading in global financial markets is likened to navigating a vehicle in a foreign city during rush hour, where market participants must always be prepared for sudden changes in direction and market congestion. Investment opportunities can emerge and vanish within seconds, meaning that speed of reaction alone is no longer sufficient to achieve optimal results. Retail investors are required to expand their market understanding and utilise appropriate analytical tools to identify and assess various potential transaction setups in a measurable manner.
Kar Yong Ang, a Financial Market Analyst at ELEV18, explains that day trading focuses on opening and closing transaction positions within the same trading day to avoid overnight risk exposure. “Traders typically use shorter timeframes to identify short-term opportunities. As a result, they may open dozens or even hundreds of leveraged trades, holding them for only a few minutes or seconds, and closing positions even if the profits are minimal,” Kar Yong Ang stated in a press release on Friday (25/09/2026).
From an economic efficiency perspective, selecting market instruments with high liquidity, such as major currency pairs, large-cap stocks, and futures indices, is crucial as they offer tighter bid-ask spreads. Kar Yong Ang illustrated that if a stock is bought at 100 USD and sold at 99.95 USD, the spread difference is 0.05 USD.
“A narrower spread generally means lower transaction costs, which can make a significant difference when a user executes hundreds of trades,” he explained.
However, the calculation of transaction profitability is not determined by the spread alone, but is also influenced by exchange fees, broker commissions, and the risk of slippage—the difference between the actual execution price and the expected price when the order is placed.
As an economic calculation example, a market participant who buys 1,000 shares at 100 USD and sells them at 101 USD would generate a gross profit of 1,000 USD. However, after accounting for spread costs, a commission of 0.1 per cent for both buying and selling, exchange fees of 20 USD, and slippage of 0.05 USD per share, the net result received decreases to less than 800 USD.
In addition to transaction operational costs, risk management is a primary pillar in maintaining capital sustainability. The mathematical effect of asset depreciation shows that recovering losses requires a larger percentage gain as the accumulated loss increases.
“A 10 per cent decrease in a 10,000 USD account leaves 9,000 USD, meaning a trader needs to achieve an 11.1 per cent profit just to return to 10,000 USD. Meanwhile, a 50 per cent decrease leaves 5,000 USD, which requires a profit of up to 100 per cent to recover the original capital. Therefore, the main priority for traders is to keep losses within clear risk management limits,” said Kar Yong Ang.