Rather than paying a lump-sum brokerage fee, day traders pay pennies on each share to the company through which they trade and may also pay a fee to rent the equipment. The fee isn't necessarily cheaper than brokerage fees, but traders say they like the freedom of executing their own trades. Although they can also trade on the New York Stock Exchange, most day traders favor the Nasdaq because of its heavy concentration of the more volatile technology stocks. The volatility helps create the opportunity to make more money. Traders get a feel for a stock's direction by watching what market makers do.
Market makers are brokerage firms that keep an inventory in a particular stock to sell to customers.
They buy or sell stock to keep an orderly market. Watching the market makers lets traders stay a step ahead of the general public. That step might be only a few minutes' lead, but for the lucky ones, a minute is plenty. They also encourage investors to close out their accounts by the end of each day so they are not vulnerable to overnight swings in stock prices on foreign markets. Unlike investors who hold stocks for months, years or decades, day traders typically try to unload their holdings within seconds or even nanoseconds of purchasing it.