Understanding Day Trading and If It's Right for You

 Understanding Day Trading and If It's Right for You
Published: 12 April 2019 (2946 Views)
Most people who drift off and have thoughts of quitting their job during a stressful day and trading stocks for a living are daydreaming about day trading. Careless or inexperienced traders can lose their nest egg and wreck their lives in the blink of an eye if you're not careful. But those who apply strategy and risk management can make a significant investment. If that sounds interesting to you, read on to learn how day trading works and how you can help mitigate risk when day trading.

Where to Begin?

Buying and selling stocks in a short time frame throughout a day is the short-answer for those wondering what is day trading. The goal is to earn a smidge of profit on each trade and then compound gains over time by day trading them to earn more. The process sounds super simple at face value, but it is one of the hardest types of trading to do successfully consistently. Online stock brokers and cheap trades have made the appeal of day trading more accessible to the masses. Most successful day traders treat it like a full-time job, rather than a few quick hours of trading. A recent 2010 study indicated that only 1% of day traders are able to earn profits consistently. Those who do devote days of practice to day trading to hone their craft. In other words, it's not something you can manage between your own busy schedule.

How Day Trading Works

Most day traders want to see a stock with a lot of volatility. They rely heavily on these volatile fluctuations to earn profits. That's also one reason why day traders don't care if a stock is going down or up or the cause of these fluctuations. Some day traders will make multiple trades of the same stock throughout the day to capitalize on various movements throughout the day. Whichever strategy a day trader uses, you can bet it's based on price movement and making the most of it rather than long-term sentiment.

Why Day Trading Is Hard

Day trading is hard because they are competing with professionals who know all the tricks and traps. Professional hedge fund managers have the expensive trading tech for spotting every single day trade that comes across the stock scanner. These trades are designed to skim pennies, and it is a crowded field, so there are tons of competition. This competition can bring even more volatility to a stock than predicted when lots of day traders are shuffling the stock around. Psychological biases are also the natural enemy of day trading. Selling winners too early and holding losers too long are often the results of getting too emotionally involved in the trade. Most day traders call this pattern picking the flowers and watering the weeds. Successful day traders have to pay taxes on their net-short-term gains at the marginal tax rate. That can be as high as 37% depending on your income bracket. The upside to this is that gains can be offset with trading losses.


- Byo24News

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Comedian Gonyeti abductued and tortured

by Mandla Ndlovu | 22 August 2019 | 74 Views

Phelekezela Mphoko exposes ZANU PF killing secret?

by Mandla Ndlovu | 22 August 2019 | 107 Views

Ginimbi throws lavish party for journalists

by Mandla Ndlovu | 22 August 2019 | 71 Views

PHOTOS: Guns fired at MDC MP's house

by Mandla Ndlovu | 22 August 2019 | 71 Views

Kembo Mohadi sucked into murder of World Vision employee?

by Mandla Ndlovu | 22 August 2019 | 91 Views

The right man to convene Mnangagwa-Chamisa dialogue revealed

by Nicholas Ncube | 22 August 2019 | 90 Views

Bulawayo woman killed in United Kingdom

by Mandla Ndlovu | 22 August 2019 | 48 Views

Rule of law is for us, claims Mnangagwa

by Staff reporter | 22 August 2019 | 37 Views

25 new buses for civil servants launched

by Staff reporter | 22 August 2019 | 49 Views

Mobile base stations to resume normal service as load-shedding eases

by Staff reporter | 22 August 2019 | 41 Views

Zanu-PF getting ready for 2023 elections

by Elijah Chihota | 22 August 2019 | 40 Views

Bhasikiti hacks lover to death

by Staff reporter | 22 August 2019 | 63 Views

Mnangagwa demands loyalty

by Staff reporter | 22 August 2019 | 51 Views

TelOne FC officially unveils Rahman Gumbo

by Staff reporter | 22 August 2019 | 43 Views

Pirate taxi passengers beat up lone gunman

by Staff reporter | 22 August 2019 | 47 Views

Zimbabwe stands strong after MDC-Alliance conspiracy to cause chaos

by Nduduzo Tshuma | 22 August 2019 | 38 Views

Govt to guarantee 99-year leases

by Staff reporter | 22 August 2019 | 49 Views

Monthly inflation drops: ZimStat

by Staff reporter | 22 August 2019 | 43 Views

'New Zimdollar not priority,' says Mthuli Ncube

by Staff reporter | 22 August 2019 | 46 Views

Mushowani on the verge of collapse

by Staff reporter | 22 August 2019 | 24 Views

Binga bemoans high telecoms costs

by Staff reporter | 22 August 2019 | 26 Views

Raja tears into 'venomous' Grant Flower

by Staff reporter | 22 August 2019 | 23 Views

Gwanda suburb residents build Blair toilets

by Staff reporter | 22 August 2019 | 25 Views

Mnangagwa launches PSC Strategic Plan

by Staff reporter | 22 August 2019 | 23 Views

Mobile money cash out: RBZ headache

by Staff reporter | 22 August 2019 | 27 Views

Currency devaluation slashes Zimbabwe wages by 90%

by Bloomberg | 22 August 2019 | 25 Views

Zec in quandary over delimitation exercise

by Staff reporter | 22 August 2019 | 26 Views

Robberies spike in Bulawayo

by Staff reporter | 22 August 2019 | 19 Views

Potraz promises to revamp ICT in Binga

by Staff reporter | 22 August 2019 | 24 Views

MDC chairman buried

by Staff reporter | 22 August 2019 | 25 Views

Abduction fears grip MDC members

by Staff reporter | 22 August 2019 | 26 Views

BCC mulls tuition fee hike

by Staff reporter | 22 August 2019 | 23 Views

Zimbabwe civil service top heavy, bloated

by Staff reporter | 22 August 2019 | 24 Views

Gudyanga trial commences

by Staff reporter | 22 August 2019 | 36 Views

Mnangagwa's government: The mask has slipped

by Nqaba Matshazi | 22 August 2019 | 36 Views

Mnangagwa's govt must address economic fundamentals

by Editorial - Newsday | 22 August 2019 | 31 Views

'More Zimbabwean families survive on diaspora remittances'

by Staff reporter | 22 August 2019 | 24 Views