Many people hope to make a living doing something they love. While many can say their chosen career is a passion, not many can say they get to do something they love for a living. For many Americans, trading stocks is that passion. The idea of making a living doing something you love is an interesting one, but is it actually possible?
Why day trading is worth it
To understand the benefits of day trading it is important to understand the time frames involved. Many day traders get out at about 9 or 10 in the morning. The rest of the day they relax and only trade very, very small portions of their portfolio, sometimes just a few cents worth of stocks. During the day they often get bored and change their mind many times about where they want to go with the money. This is why day trading is quite a bit different from ordinary investing. If you invest in a regular 401k plan or mutual fund, you have a certain amount of money that you have to invest. You may not be able to trade a few dollars worth of stocks all day, you might have to be more cautious. These are the benefits day traders gain: Time freedom.
Day trading is a 24-hour job
Before getting into the challenges of day trading, there are some important facts to know. Day trading is a 24-hour job. There’s no summer or weekend shifts in trading. It’s the work of someone who has an interest in money and who is willing to put in the work to make it work. Day traders sleep at least five hours a night to make sure they are up for the day. It’s a full time job with very little room for error. And it’s a 24/7 job. That means no weekends, no breaks, and no holidays. There is very little time to get your head around how you are going to set up your account to take advantage of the market changes. While day trading, you’re not likely to make money from every trade. In fact, most people don’t. Most day traders lose money. But, they get plenty of practice.
The Day Trading Mindset
Many people who trade stocks in particular approach it the wrong way. They will do it to try and get rich, or more likely to try and make a quick buck. While day trading is by no means a bad way to make a living, there is nothing wrong with wanting to be rich. Ultimately, as with most things, there is a right and a wrong way to approach the task. A good day trader is going to see every opportunity as a potential win, however small. Day trading can mean the difference between making a profit and losing it all. Day traders will never blindly sell just to sell, or buy just because they think they can make money. Instead, they will take every opportunity to profit, but if the trade doesn’t work, they will pull out of it as quickly as possible.
Day trading is risky
Many people have heard that day trading is the high-risk investment world, but that’s not the case. They misunderstand how a day trader operates. The most active day traders like the ones featured on Shark Tank make a living by trading stocks for high stakes. Day traders do not gamble with their money. They make a living trading stocks and other financial instruments at high speed and with precision. It’s really a fancy financial instrument that takes advantage of the time differences between securities. One of the biggest disadvantages of day trading is that trading will drain your wallet. Day traders invest large amounts of money. In fact, the average trader trades 30,000+ shares each day. That means that the average day trader loses up to 30% of his investment in any one day.
Day trading is a demanding job
Some might consider day trading a hobby. In reality, it’s a highly demanding job that requires dedication and a high level of knowledge of the markets. Day traders constantly analyze the market, do their research, and make decisions on what stock to buy based on technical analysis and fundamentals. One of the challenges of day trading is it requires a lot of concentration and time. Not only is your full attention on the stocks you’re monitoring, but it also requires the thought process that goes into it. Day traders must be in tune with where the stock market is going and what’s happening, so it’s not an easy process. Trading on a whim without considering the potential consequences might land you on the business news Another challenge day traders face is getting in and out of trades.
While trading stocks is a successful profession for many, making a living from it is a different story. The bottom line is that there is a lot of risk, and being a day trader can add a whole other level of volatility to an already volatile environment. If you are considering trading stocks, you need to understand the risks involved. If you are interested in stocks but don’t know where to start, we suggest following a few simple rules to make sure you do not lose money.