The Good and Bad of Day Trading
As with most things in life, Day Trading comes with advantages and disadvantages. With day trading, you are making investments that last a few seconds or minutes while with long-term investment, you are making a trade that will remain open for months and/ or years. With day trading, you are making your decisions based on how the price of a given stock is fluctuating in a short time. Generally, day trading as the name depicts is done on the same day.
Let’s have a look at the good and the bad:
Money on the quick: With day trading, you are looking at potentially making quick money if you trade right. You need plenty of discipline and a good strategy to achieve this.
No need to worry about overnight risk: Considering positions are generally closed at the close of business, overnight risks are generally avoided. Imagine not having to worry about the impact on stocks that may arise due to negative announcements after the end of the day or in the event of a merger, or not having to worry about how it may affect your stocks.
Potential to up your experience: Considering the large volumes of stocks available to be traded, day trading can be a good training ground for long-term investments. You can gain immense knowledge on which strategies to use and how to monitor the index for better deals.
Get your feet wet as quickly as possible: Day trading makes it possible to jump right in and create an account and start trading. You will need at least $500 or even less in your account to get started. You will need a brokerage account to get things moving. Once you do your research and find a strategy that works for you, you will be on your way to possibly make the best of your trading journey. Be sure to only invest money that you won’t miss if it goes missing. Start small and grow big as you gain experience.
Time is not a big factor: Day trading makes it possible for you to set your trading hours. As long as you are within the market hours, you are good to go. You can opt to only trade for a few hours on any given day, as long as you are happy with your performance for that particular day.
Freedom: Day trading offers plenty of freedom as you don’t have to be in a particular city or country to participate. All you need is good internet and your brokerage account and you are good to go.
Stressful: Day trading can be stressful, even for seasoned traders. As a beginner, you will experience plenty of stress as you learn the ropes. You may lose money along the way but you will learn a thing or two in day trading. Don’t go into day trading thinking you will enjoy immediate results. Whether you make a loss or gain, it is important not to attach too much emotion to the trade.
Insufficient time: Just as you are enjoying a certain position, it may be closed out before realizing your profit! This can be frustrating.
Potential to lose plenty of money in a short time: There is plenty of risk in day trading. You may lose it through overtrading or not having a diversified portfolio. You may also lose it if you choose to remain emotionally attached to a given stock.
After taking a look at the good and the bad of day trading, you should be ready to make your decision on whether or not it is your cup of tea. Remember to start small, develop a winning strategy, exercise patience, and not attach emotions to stocks you choose to trade.