Day trading is rife with controversy.
Some decry it as gambling, others have made their fortunes on it.
This day to day method of trading isn’t suitable for everyone. If you’ve got the chops then there’s a lot of potential—but it’s just as easy to lose everything.
If you’ve been wondering about day trading, and whether it’s the right choice for you then read on. We’ll demystify the process and help you decide whether it’s the right investment option for you.
What is Day Trading?
Explaining day trading is pretty simple for the most part: if you buy and sell a stock within the same day then you’re participating.
Day trading isn’t limited to just stocks. Many traders have made it big in the currency markets, or forex, and through futures.
The image most people have of investors constantly trading through the day, their eyes locked on seemingly never-ending graphs and letting go at just the right time to make a big win is accurate.
Who’s Cut Out for Day to Day Trading?
While the average perception of a day trader is guided by Hollywood, the type of person who excels at day trading is definitely a special one.
You have to be both willing to take risks and methodical about managing them or you can lose just as big as you can win. Those who get emotional easily, in either a positive or negative direction, are going to have trouble keeping it up.
If you like both taking risks and being cautious you’re on the right path.
In addition, anyone looking to get into day trading needs to make sure they have the capital required to do so. Borrowing money to trade with can be a slippery slope and has ruined many would-be traders.
The margins in day trading are often smaller than people think, fluctuations of an asset through the day can seem large but it also requires you to let go at exactly the right time.
And finally, attention and practice are key.
While there’s usually more delay than in the actual market there are a lot of programs available which will let you “play” for free so you can learn the in’s and out’s without risking your investment before diving in.
Even if you’re going the practice route, try reading up on beginner tips before you begin.
Is Day Trading a Good Idea?
It can be.
The problem that arises for most people is that they see it as an easy win in the market. Day traders have a certain public image that doesn’t quite fall in line with the reality of the situation.
Educating yourself and practicing with fake capital will usually give you a good idea of if it’s a wise choice for your own temperament. Just remember to never trade with money you can’t afford to lose.
The truth is that more people lose their money than make it, but day trading is far from impossible to profit from. Just don’t expect to become a millionaire overnight.
Think You’re Ready?
Trading on a day to day basis is high-risk and high reward. For the right person, it’s a great way to turn a profit on a nearly daily basis.
For the wrong one, it can lead to financial ruin and debt with a couple of wrong moves.
The key is to step into things with eyes wide open. It’s not for everyone in the end but you won’t know if you’re not willing to learn.
If you’re interested then why not browse our blog and keep learning?