Day trading, in which people buy and sell stocks several times a day, now accounts for 2% of market activity according to the Nairobi Securities Exchange (NSE).
The service was introduced in November last year to allow investors and speculators to make multiple trades in one day with the ability to profit from price changes.
Previously, shares bought could not be sold on the same day and you had to wait for the transaction to be validated. The introduction of day trading aims to give more options to traders and investors in addition to increasing market liquidity.
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It’s getting off to a slow start, in part because most market participants have longer investment holding times. Many retail investors, who are the primary target of the service, are also unfamiliar with the risks and opportunities presented by day trading.
“Day trading has so far contributed around 2% of market activity on average,” the stock trader said in its latest annual report.
The phenomenon of buying and selling stocks several times a day without tying up your capital has become a success in the United States in the wake of the Covid-19 pandemic.
The trend has been attributed to increased gamification of investing in addition to a sharp drop in trading commissions, with some brokers eliminating fees altogether and opting to generate revenue from market makers.
In Kenya, day traders face substantial transaction costs despite receiving a small discount on standard fees.
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“To make day trading more attractive, the NSE Board of Directors has approved a 5% discount on the closing trade, which is charged at 0.114% from 0.12%. This discount directly benefits the investor.
The performance of day traders in the local market is not known. In the United States, dozens of individuals became dollar millionaires as day traders collectively finally lost the gains they had made during the recent market correction.