In day trading, usually the positions don’t remain open overnight. Before leaving, the trader mostly closes all his open positions at the end of the trading session and enjoys a peaceful sleep because not even his single penny is at stake. When the next day begins, he wakes up with new hopes and new frame of mind and enters into fresh trading. However, some day traders sometimes come across a stock, which they find worth holding for longer period of time. This is never a wise idea due to the risk of unconsciously holding low quality stocks overnight.

Though in day trading, holding stocks overnight brings good money yet it is a very risky trade because sometimes you even lose much more money than you gain from it. This is because of two reasons. First, there is a probability that the company, whose stock you are holding may sell its stock, preannounce its earning and its stocks can even lose value because of the overall down stock market. Secondly, you decide holding stock overnight with out much knowledge and information about the performance of the stock and there is high probability that you may choose low quality stock.

There are many companies, which just appear to perform well, and the figures of their financial statements are mostly misappropriated. If we look at their performance for long term, they don’t prove themselves due to having problems like accounting irregularities, lower stock price for long periods, and sometimes even have problems in debt management. If you don’t have in-depth knowledge of the company and the performance of its stock, you can certainly choose low quality stock and can loose your big money.

If you are in swing trading or long term trading, holding stocks overtime is good but in day trading I would recommend you to stay away from it completely unless you know the company manages its debts, if it has increasing stock price, pays good dividends and has overall consistent profits or not. If you don’t have such knowledge, closing all deals at night and coming to the office with clean mind on the next day is a much better way of trading.