What is Day Trading?
Day trading is not a hobby or occasional activity if you are serious about trading to make money. While there is no guarantee you will make money or be able to predict your average rate of return over any period of time, there are strategies you can master to help you lock in gains while minimizing losses.
It takes discipline, capital, patience, training and risk management to be a
successful day trader. If you are interested, review the best stock brokers for day trading, as the first step is to choose the right broker for your needs.
Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Day traders should only risk money they can afford to lose, the reality is that many day traders incur huge losses on borrowed monies, either through margined trades or capital borrowed from family or other sources. These losses may not only curtail their day trading career but also put them in substantial debt.
Day traders work alone, independent from the whims of corporate bigwigs.
They can have a flexible working schedule, take time off whenever
needed, and work at their own pace, unlike someone on the corporate
treadmill.
Day traders have to compete with high-frequency traders, hedge
funds, and other market professionals who spend millions to gain trading
advantages. In this environment, a day trader has little choice but to spend
heavily on a trading platform, charting software, state-of-the-art computers,
and the like. Ongoing expenses include costs for obtaining live price
quotes and commission expenses that can add up because of the volume
of trades.
Long-time day traders love the thrill of pitting their wits against the market
and other professionals day in and day out. The adrenaline rush from
rapid-fire trading is something not many traders will admit to, but it is a big
factor in their decision to make a living from day trading.
To really make a go at it, day traders must quit their day job and give up
their steady monthly paycheck. From then on, the day trader must depend
entirely on their own skill and efforts to generate enough profit to pay the
bills and enjoy a decent lifestyle.
Day trading is stressful because of the need to watch multiple screens to
spot trading opportunities, and then act quickly to exploit them. This has to
be done day after day, and the requirement for such a high degree of focus
and concentration can often lead to burnout.
For many jobs in finance, having the right degree from the right university
is a prerequisite just for an interview. Day trading, in contrast, does not require an expensive education from an Ivy League school. While there
are no formal educational requirements for becoming a day trader; courses
in technical analysis and computerized trading may be very helpful.
