Today, you’ll learn is short selling considered day trading.
Day trading has requirements, and there are simple rules one can follow.
The rules are as stated here:
Short selling is not considered day trading unless the trade is opened and closed within the same day.
The closing of trades is counted to determine the type of trade one is making.
For example, an unclosed short entry is not a day trade at the close of the market.
Day trade usually happens if one trade is exited within a day, even if it is not a short trade.
The real question is, do you understand what a day trade is?
What Is Day Trading?
According to FINRA, “Day trading refers to buying then selling or selling short then buying the same security on the same day.”
It means that it does not matter whether the entry is either long or short.
So, short selling is not exempt from day trading rules.
The rules are so simple that anyone can follow.
What is Short Selling?
However, it is usually complex because the losses are unlimited.
Because the losses are unlimited, short selling is often not recommended for beginners.
It is mostly not recommended because it is risky due to the small odds given to the trader.
The odds are stack against traders because the potential downside is unlimited.
Although it is unlimited, traders can also short sell stocks provided that there is a set stop-loss order.