Day Trading: Is It Right For You?

Day Trading: Is It Right For You?

Day trading involves buying and selling stocks, options or futures with the aim of earning short-term profits. It is difficult to succeed at day trading, so investors should take several precautions.

The allure of day trading is undeniable: Earning your living executing trades from the comfort of your home seems far more exciting than most 9-to-5 gigs. Trouble is, careless or inexperienced day traders can wreck their portfolios in the blink of an eye.

Still interested? Read on to learn how day trading works, and the ways you can help minimize its risks — including our Free E-Book: The Benefits of a Rule Based Trading System.

What is day trading?

Day trading is the practice of buying and selling financial instruments in a short time frame, typically a day. The goal is to earn a tiny profit on each trade and then compound those gains over time.

With the rise of online brokers and cheap trades, day trading became a viable (albeit very risky) way for retail investors to turn a few days’ worth of quick wins into a substantial bankroll. Successful day traders treat it like a full-time job, not merely hasty trading done between business meetings or at lunch!

In practice, however, retail investors have a hard time making money through day trading, just 1% of day traders consistently earn money. The very small number who do make money consistently devote their days to the practice, and it becomes a full-time job, not merely hasty trading done between business meetings or at lunch.

If day trading is something you must try, gain from the experience of full-time day traders.

How day trading works

Volatility is the name of the day-trading game. Day traders rely heavily on market’s fluctuations to earn their profits. They like market’s that bounce around a lot throughout the day, whatever the cause: a good or bad earnings report, positive or negative news, or just general market sentiment. They also like highly liquid market’s, ones that allow them to move in and out of a position without much affecting the price like Crude Oil Futures.

Day traders might buy if it’s moving higher or short-sell it if it’s moving lower, trying to profit on a fall. They might trade the same market many times in a day, buying it one time and then short-selling it the next, taking advantage of changing sentiment. Whichever strategy they use, they’re looking for a market to move.

Why is day trading hard?

There are two major reasons:

  1. Retail day traders are competing with professionals. Pros know the tricks and traps. They have expensive trading technology, data subscriptions and personal connections. They’re perfectly outfitted to succeed, and even then they often fail. Among these pros are high-frequency traders, who are looking to skim pennies or fractions of pennies — the day trader’s profit — off every trade. It’s a crowded field, and the pros love to have inexperienced investors join the fray. That helps them profit.
  2. Retail investors are prone to psychological biases that make day trading difficult. They tend to sell winners too early and hold losers too long, what some call “picking the flowers and watering the weeds.” That’s easy to do when you get a shot of adrenaline for closing out a profitable trade. Investors engage in myopic loss aversion, which renders them too afraid to buy when a market declines because they fear it might fall further.

How do I start day trading?

The first step is to ask yourself: Am I truly cut out for this? Day trading requires intense focus and is not for the faint of heart. It’s also not something you want to risk your retirement savings on.

Day trading is not easy!

Live trade taken in the Live trading room on September 12th 2019:

I continue to post the live day trading videos on my Youtube Channel where you can find more live trades from the last 4 years, all taken live in our Live Trading Room.

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  • TRADING SPREADSHEET STOCKS, OPTIONS, FOREX AND FUTURES – VALUE $199

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Live Trading Room

Live Trading Room

Use this coupon code: TRIALTRADEROOM for the 50% Discount!

NO Market replay is involved, date and time are always visible in the windows taskbar! In market replay time from trading platform and taskbar will not match!

DON´T FORGET TO GET YOUR FREE COPY OF THE E-BOOK ´´ THE BENEFITS OF A RULE BASED TRADING SYSTEM´´

Hope this helps,

Alexander Soares

 

 

 

 

 

 

 


Also published on Medium.