Day trading is still a hot topic in the investment scene. Apps have made it easy for those with no prior investment experience to put money on the table and begin generating fast cash. But day trading is not something to be taken lightly, and it can have serious financial consequences if you aren’t fully aware of the risk you’re taking. If you’re interested in becoming a day trader, read these pros and cons before you invest a single penny. Not only will you be more prepared to make better choices, but you’ll also be far more equipped to avoid some of the most common mistakes newcomers make.
You are Your Own Boss
Making day trading your full-time job is not easy, and it likely will not happen for some time after you start. However, you’re always the one in total control over your investments and, ultimately, profit. Being a day trader means you set your own hours, govern your own actions and only do what you truly believe in. One of the main reasons people are attracted to investing as a career is that they gain total personal liberty over their day.
There Is More Than One Way to Work
There are multiple day trading strategies you can employ to find the right one for you. This leaves room open for more flexibility, which is often hard to find in other types of investment. For the analytical and problem-solving types, nothing can be more thrilling than assessing the current market and deciding what course of action to take next. There’s always a little risk, but that’s part of the thrill.
There’s No Overnight Risk
Long-term trade investors must worry about the stock market crashing and losing thousands of dollars in just a few hours. Day traders never have to worry about overnight changes. You’ll eliminate one of the major sources of stress long-term investors face on a daily basis. Whether it’s economic downfall, political strife or some business scandal that causes a company’s stocks to tank, you’ll be able to quickly make decisions without having to lose major shares in the process.
You Will Lose More Than You Earn at First
Day trading is sometimes referred to as a get-rich-quick scam, and for people who are tempted by certain apps or clubs, this is true. You’ll lay down hundreds or thousands of dollars to a third-party in the hopes of waking up a millionaire only to be in crippling debt. The more you wager, the more you have to lose, and the stakes can be unfathomably high for someone putting their entire savings on the table.
The minimum balance to legally trade stocks is $25,000. That’s a down payment on a house or more than a quarter of a new car. It’s one or two years of college. It’s a major investment that some people unfortunately gamble away in just 24 hours. You need a lot of capital to start day trading, which means you also need to have another source of income until you’re earning a decent profit.
It is Research-Intensive
If you envision your first venture into day trading lying poolside with a margarita in one hand and your phone in the other, think again. Achieving success in this business requires scrutinous planning, something that many newcomers are either unsure how to do or unwilling to do. You’ll spend hours in front of the computer every day checking the market, keeping a spreadsheet and plotting out your next investment. You’ll need to be good at bookkeeping and not rely on an app to handle the entire thing for you. After all, it’s only a tool. The real success is rooted in your own knowledge.