As is the case with any new adventure or project, the person doing them should always research and find out more before they get started. Entering the day trading market is no exception. If anything, research becomes even more important when thinking about entering some type of trading or investing, as the trading processes are influenced by a large number of factors.
One of the most common preparations is to look at the pros and cons of a certain project before getting started. It is important to be realistic in your calculations, especially as day trading is paid and played with the money in your pocket. Therefore, keep reading before jumping over to the best trading platforms on the market.
What Is Day Trading?
Before we get started, it is important to understand the concept of day trading. Day trading is a form of short-term investment, as the trades are entered and closed within a single day. A trader can make several trades within the same single trading session.
Most who are active day traders do it to capitalize on small price movements in areas such as high-liquidity stocks or currencies (also called forex trading). As a result, day traders focus on many small winnings rather than one big jackpot. Among the most common items you can trade in day trading are stocks, crypto currency, binary options, futures, and commodities.
Benefits Of Day Trading
Total Personal Liberty
One of the factors that most day traders value is the total personal liberty of it. As a day trader you set your own hours, choose your trading strategies by yourself, and are overall your own master.
No Overnight Risks
Where long-term investors worry about stocks crashing in value overnight, day traders can easily adapt to quick changes in the market and stay on top of the game without too unpleasant surprises.
Variety Of Trading Strategies
Day trading never gets boring. On top of constantly following global and market specific updates for your investments, there are a large number of trading strategies to learn and learn to adapt. In other words, day trading equals continuous learning.
Instant Results
Day trading is an instantly rewarding business, as you will know exactly how much money you earned (or lost) the minute you close a trade. While this may send traders into false senses of security after big wins, it is also a fun financial quirk.
Downsides Of Day Trading
Expensive Start Up
For those who want to make day trading their career, they need large savings to get started. According to the pattern day trading rule (PTD), investors who make 4 or more trades within a five day period need 25,000 USD saved. If they don’t, their account may be suspended. Keep in mind that an account's value could decrease if securities decrease, so you may need closer to $30,000 to be on the safe side.
Research Intensive
While a common misconception portrays day traders as casually checking their phone and placing trades, it is actually quite an intense career. Traders have to constantly read up on news from businesses, general market trends, and political happenings that may affect the market. On top of this they need to learn a wide range of trading strategies.
Volatile Market
Last but not least, day trading is a volatile market. Just as you can win large sums in a single day, you can also lose vast amounts of money in a short time. It is especially for this reason that new day traders need to be aware of the risks and read up on the market before getting started. You will usually find increased volatility with tech stocks, penny stocks, cryptocurrencies, and national currencies during geopolitical disruption.
Conclusion
Aside from the minimum balance required to day trade, don't invest and trade more than you can afford to lose while day trading for a living! Learn from other top day traders and make sure to be cautious where you can.
