Understanding Day Trading and If It's Right for You

 Understanding Day Trading and If It's Right for You
Published: 12 April 2019 (971 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

Dirty tactics threaten MDC congress

by Mandla Ndlovu | 23 May 2019 | 41 Views

Welshman Ncube,Hwende take early lead in MDC poll

by Mandla Ndlovu | 23 May 2019 | 45 Views

Mnangagwa warned of a looming coup

by Mandla Ndlovu | 23 May 2019 | 73 Views

Botswana's elephants: myths vs facts

by Conservation Action Trust | 23 May 2019 | 47 Views

Patrick Zhuwawo mocks Mnangagwa's government

by Mandla Ndlovu | 23 May 2019 | 81 Views

How Simon Khaya Moyo survived Chiwenga's coup

by Mandla Ndlovu | 23 May 2019 | 88 Views

MDC congress roars to life

by Methusi Ncube | 23 May 2019 | 79 Views

BREAKING: Dumiso Dabengwa dies

by Mandla Ndlovu | 23 May 2019 | 79 Views

Soldier up for carjacking

by Staff reporter | 23 May 2019 | 81 Views

Five 'plotters' denied bail

by Staff reporter | 23 May 2019 | 74 Views

Mnangagwa says, 'Don't panic'

by Staff reporter | 23 May 2019 | 112 Views

New Zupco buses come to Bulawayo

by Staff reporter | 23 May 2019 | 72 Views

Kidnap & assault magistrate acquitted

by Staff reporter | 23 May 2019 | 64 Views

Sangoma takes pangolin fight to High Court

by Staff reporter | 23 May 2019 | 62 Views

Chamisa buckles under Bulawayo pressure

by Staff reporter | 23 May 2019 | 79 Views

Government to hire 1,600 health workers

by Staff reporter | 23 May 2019 | 79 Views

Mnangagwa's 'last way to life'

by Moses Tofa | 23 May 2019 | 101 Views

Court freezes car dealer's bank account

by Staff reporter | 23 May 2019 | 69 Views

Chasi guns for State-owned firms

by Staff reporter | 23 May 2019 | 60 Views

Ginimbi's passport temporarily released

by Staff reporter | 23 May 2019 | 51 Views

Headmen in soup for inviting tsikamutandas

by Staff reporter | 23 May 2019 | 71 Views

Zimbabwe's outlook not rosy, says Fitch

by Staff reporter | 23 May 2019 | 60 Views

Zimra dollarises border charges

by Staff reporter | 23 May 2019 | 67 Views

'Mnangagwa leadership hurting us'

by Staff reporter | 23 May 2019 | 62 Views

Zimbabwean prop join Sharks

by Staff reporter | 23 May 2019 | 51 Views

Mnangagwa's dialogue will not work, simple!

by Nqaba Matshazi | 23 May 2019 | 67 Views

Mohadi snubs Chief Ndiweni

by Staff reporter | 23 May 2019 | 51 Views

Zimbabwe Women's seven's side coach steps down

by Staff reporter | 22 May 2019 | 89 Views

Guard against uncontrolled fires

by Thomas Murisa. | 22 May 2019 | 85 Views

Lack of Political will has brought unnecessary calamity

by Tinashe Eric Muzamhindo | 22 May 2019 | 131 Views

Mnangagwa faces impeachment

by Mandla Ndlovu | 22 May 2019 | 210 Views

Perence Shiri dissolves CSC board

by Mandla Ndlovu | 22 May 2019 | 113 Views

Zimbabwe Army steps in

by Mandla Ndlovu | 22 May 2019 | 163 Views

Chamisa's spin doctor attacked

by Mandla Ndlovu | 22 May 2019 | 114 Views

Counseling offered for Game of Thrones fans

by Mandla Ndlovu | 22 May 2019 | 117 Views

Nelson Chamisa rallies Zimbabweans

by Mandla Ndlovu | 22 May 2019 | 126 Views