Is Day Trading For Everyone? A Simple Guide To Help You Decide

(Repost) Is Day Trading For Everyone? A Simple Guide To Help You Decide

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Are you thinking about day trading? It’s a tempting proposition – the idea of making quick and easy money in the stock market, at least that's what many Fake Gurus would tell you. Is day trading for everyone? Let’s look at what day trading is and some pros and cons to help you decide if it’s the right path for you.

MISCONCEPTIONS

Let's throw out a few misconceptions from the get-go. Just because a person tweets about making money and has a few photos with a Lamborghini doesn't mean they are a successful trader. The car could be rented, and that individual doesn't make the money he says or makes the majority of their money from selling subscriptions to blind sheep newbie traders that believe anything on the internet or that specific trader could be trading with paper money (practice account that doesn't use real money). Now, before you get upset and perceive that I am rude or have a harsh teaching tone, realize that one can not be successful in trading, business, or life if you cannot accept the truth. Delusion has zero space in the stock market. If you mindlessly follow random trade alerts from the internet without doing your du-diligence to understand the reasoning for the trade, you are a blind sheep amongst a game full of wolves. This is an absolute fact.

When you look for teachers or mentors, look for substance. The substance can be their character, truth, honesty, humbleness, ability to adapt, and anything that can get you to bypass the material shiny objects. These qualities allow you to find focus and discipline in the stock market.

As recently as 2022-2023, you had trading groups get arrested and shut down for pump-and-dump Ponzi schemes. Read here. Guess who were the ones that lost money while the top of the food chain profited millions: the blinded sheep. Those who came in late, thinking they would become millionaires overnight without any actual work, followed a group of flashy people who promoted a trading career that made newbies believe it was all so easy—enough said about this topic. Let's move on, as I could go all day about this topic.

WHAT IS DAY TRADING?

Essentially, day trading is the buying and selling stocks within the same day. Some days, traders will hold a position for a few minutes, while others will hold it for hours. The key is to buy low and sell high – and then get out quickly before the stock reverses. Please recognize you can also make money when stocks go down, giving traders absolute opportunity throughout the year.

There are a few things to consider before starting day trading. First, it’s essential to understand the general outlook of the stock market. This means you must learn that the stock market is everywhere. Retirement plans, banks, and politics. Many people stress the importance of drawing lines and gathering levels on the chart; however, without a fundamental understanding of measuring value in a company or how specific data drives the equities and housing market, you may become lost in the chart. Those who get lost in the chart usually do not last long as they believe the chart is God. You can have the most bullish chart you've seen all year, but if we are amid a recession, a war, or a law/policy change, the chart essentially can be worthless.

You also need the discipline to stick to your trading plan and not get emotional about your positions. Finally, having the capital or risk management plan would be best to weather the inevitable losing streak. If you want more talk on building a trading plan or how much money you should start with, subscribe to www.simplifywallstreet.com

Day trading is a form of short-term, or active, investing where traders buy and sell securities within the same day. Day traders generally don’t hold their open positions overnight, and they try to take advantage of short-term price fluctuations. Day trading is usually done to profit from small price changes, generally less than 1%. To succeed at day trading, traders must stay abreast of all the news and political developments that could move the markets. They must also be proficient in the technical tools used to analyze the markets, such as charts, indicators, and order flow.

WHY DO PEOPLE DAY TRADE?

People's day trade for a variety of reasons. Some use day trading to generate extra income. Others are full-time traders and make their living off the markets. Most day traders use leverage through options or margin accounts to increase their buying power and make more money from their trades. Additionally, some traders are attracted to the fast-paced, adrenaline-pumping, high-risk environment of day trading. Regardless of their reasons, day traders are looking for quick gains and rapid turnover of capital, which can provide a significant return on investment.

The image above is my version of success as a trader in the stock market. I trade for freedom. You day trade and swing trade, which gives you the flexibility not to be heavily involved throughout each day, and once you make money for the day, you can close your computer and offer your time elsewhere. If I can trade and handle my business all before noon, I can delegate time to my family, my mind, other business projects, or my wife.

When you rely on big trades or the adrenaline pump to decide if you had a good or bad day, you are setting your mind up for failure in the long term. Some people are addicted to trading as they treat trading like gambling. The goal is to focus, find a strategy, trade high probable setups, and utilize risk management to make money.

RISKS?

As with any high-risk investment, day trading comes with several risks. Margin trading can magnify losses, especially if the trader overestimates their bullish or bearish stance on a particular stock. Finally, day trading is unsuitable for anyone willing to dedicate multiple hours to monitoring the markets.

Swing Trading may require fewer hours of screen time, but it is always preferred to use equity or long-expiration option contracts. With day trading, you would usually trade with less money since your investments are riskier; swing traders usually up the position size since their setups allow the market to take its course over weeks or months. Investing is a different strategy but will require less screen time.

FINAL THOUGHTS

Benefits of Day Trading?

Day trading offers several potential benefits, particularly compared to other forms of investing. The primary one is speed – day traders can quickly enter and exit positions and make money fast. There is also less capital at risk when day trading, as traders typically only hold open positions for a short amount of time. Day traders can also benefit from the liquidity of the markets, which can offer them more flexibility and better pricing. Finally, day traders don’t have to worry about long-term market trends and can make money regardless of whether the markets are going up or down.

Is day trading for everyone?

Day trading is not for everyone. It requires great dedication, discipline, and focus to succeed. Furthermore, day trading is unsuitable for investors accustomed to the stability of longer-term investments such as bonds. Additionally, it carries a high degree of risk and can result in significant losses if not properly managed.

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If you decide to give day trading a try, the first step is to learn the basics.

To read a little about my trading strategy, you can read The POWER OF $SPY.

Once familiar with the basics, you’ll want to open a brokerage account and practice on a virtual platform. This will help you get used to the platform and understand how the markets work. Additionally, you’ll want to read up on risk management and ensure you have the capital to weather any downturns. Once you’ve practiced for a while, you can start trading with real money. Keep a close eye on your positions and stick to your trading plan. Good luck!