As mentioned, a day order in trading is a type of order that is valid only for the current trading day. If the order is not executed by the end of the trading day, it will expire and be automatically canceled.

It is a time-limited instruction to buy or sell a security within a specific trading session. If the trader still wants to execute the order on a subsequent trading day, they would need to place a new order.

Day orders are typically suited for traders that want to capture a short-term price action and do not wish for their positions to remain open overnight. 

When To Place A Day Order

Day orders are typically placed during the early hours of the trading session and seek to generate profit before the session closes.

Day orders can be convenient for traders that are engaged in day trading and open and close dozens of traders every day. 

Day traders and scalpers often use day orders because their trading strategies are designed for quick, intraday trades.

Traders might use day orders when anticipating a significant news event during the trading day, as they want to enter or exit a position before the market closes.

Often such news releases reach the market during inactive hours, which creates a lot of overnight risk if the news is unfavorable. This is why most traders resort to day orders instead of good til’ canceled (GTC) orders. 

Trading using day orders comes with its fair share of advantages and disadvantages and traders need to be aware of these factors in order to use day orders effectively and incorporate them into their trading strategies. 

Pros

• Intraday Focus: Day orders are well-suited for intraday traders who aim to profit from short-term price movements without exposure to overnight risks
• Risk Management: Day orders can help traders set and adhere to specific price targets or stop-loss levels for their trades within the trading session
• Clearer Position Control: By using day orders, you have better control over your open positions, as they automatically expire at the end of the trading day

Cons

• Missed Opportunities: If the market moves in your desired direction after the trading day ends, a day order may cause you to miss potential profit opportunities
• Increased Workload: Day traders must consistently monitor and replace day orders if they want to maintain their positions for more than one trading day, which can be time-consuming
• Emotional Stress: Constantly placing and renewing day orders can lead to stress and emotional decision-making, as traders may feel pressured to manage their positions actively

• Day orders are time-sensitive market orders that are active during the day and are automatically canceled by the end of the day if they are left unfilled
• Day orders are especially popular among stock traders that do not wish to hold positions overnight
• Swing traders and long-term investors are less likely to benefit from placing day orders 
• Traders can manually adjust day orders if they expect them to not be executed before market close