There is a clear divergence of objectives between the investor and day trader. The objective of an investor is to earn a long-term capital appreciation or long-term return on the investment with a limited risk. On the other hand, day traders seek to double their trading capital every few months.
Consequently, investors are not concerned with the short-term market price fluctuations, since they are in the stock market for a long haul. They do not care if their trade orders are executed in ten seconds or ten minutes. They do not mind if the received price for the purchased stock is 12.5 cents or 25 cents higher than anticipated. 1/8 or 1/4 point in the stock price will not make a difference in the long run when the objective is to wait for capital appreciation of several points. The expectations are much more modest. At best the investors hope to double their investments in five years.
For day traders, their objective is not the long-term return on the investment but earning the short-term income. In order to earn that substantial short-term income, and thus possibly double the trading capital every few months, the day traders are willing to absorb inordinate amount of risk. Not surprisingly, the high income is associated with high risk. Consequently, day trading is extremely risky.
Since the day traders are affected by the short-term market volatility, they do care whether their trade orders are executed in ten seconds or ten minutes. Even a ten seconds wait for a trade confirmation seems to be a long time for many day traders. Since the day traders are exploiting the small and short-term price fluctuations, the traders demand from the brokerage firms almost instantaneous trade executions.
