What’s day trading?

What’s day trading?

Whether it is in relation to Forex, digital assets such as bitcoin or even mainstream stocks, Day trading has been receiving what I would term as an inordinate amount of praise. First, let’s put the record straight on what Day trading is not. Day trading is not an investment where you bet on the value of an asset in the long run. Investopedia defines day trading as buying and selling a security within a single trading day. Essentially, the trader tries to make sure there are no open positions by close of day. Doing this has its own benefits; traders do not have to hold positions that are risky overnight. Day trading involves using leverage to take advantage of small price changes in highly volatile indexes and stocks. Day traders simply buy low and sell high in a short frame of time.

Characteristics of a day trader

Sufficient capital: Since it is hard for the average trader to make money, Daytrader will use risk capital, which is an amount he can afford to lose.

In-depth knowledge and understanding of the market: Day trading is not the best approach especially for beginner traders. Traders who try day trading without the required knowledge, end up losing their money.

Discipline: A good strategy with no discipline is as good as trading with no strategy. Successful day traders are disciplined traders who plan their trades and trade their plan.

Why day trading is not for newbies

  1. You will make little or lose money

If you are an amateur, your odds of making it as a day trader are very slim. The professionals have been in the game long enough; they really understand their stuff. First, they have learned the discipline, and they understand that winning in this space requires one to invest a lot of money. To capitalize on the small movements in the market, a trader needs to invest huge sums of money that they can afford to lose. Another factor you need to consider is that by taking large positions, these players enjoy relatively lower commissions. This is not the case with small-scale traders; their gains may be so minuscule and not in a position to cover commissions.

  1. Day trading gives you a poor lifestyle

In many wall-street movies, a day trader is depicted as a rich guy living a fast-paced life of good houses and fast cars. Hence, newbies and aspiring traders get into trading with a lot of expectations; lots of money and ample free time. With Day trading, you get the exact opposite, many sit for close to 10 hours a day staring at their computers. It’s a game of numbers; you have to scan the charts and execute as many trades as possible in a day. The very reason most of us opt to be traders is to make money and live a life different from that of an office job. By choosing day trading, it is not any different from taking an office job. You will be a slave of the trading charts for the better part of your life.

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