Pros and Cons of Day Trading for a Living
Day trading for a living is no easy task. In fact, it’s a full-time job. And the risks can pile up if you don’t know what you’re doing, or if you lose focus. However, you can also bring in massive returns on a daily basis if you put in the research and make the right plays.
So is it worth becoming a day trader? Let’s take a deeper look at the pros and cons of day trading.
Pros of Day Trading for a Living
Day trading is the process of buying and selling stocks within a single trading day. And for most traders, this means making multiple trades before the closing bell.
Now, there are a variety of day trading strategies to choose from. And each will vary in its concepts. This is one of the best aspects of day trading for a living.
You can work at your own pace as long as you develop a plan and stick to it. Some day traders like to make their moves early in the day, while others will wait until the final hours the stock market is open.
Either way is fine. And it is completely up to you to decide what you want to do. You set your own pace and strategy before fine tuning it as you gain more experience.
Another great advantage of becoming a day trader is your ability to avoid overnight risk. This is a benefit that long-term investors don’t have.
Day trading is a buy-and-sell-quickly concept. You aren’t holding on to stock for any longer than a few hours at most, outside of rare exceptions. So this completely removes overnight risks. These risks include unexpected economic, political or company news that may affect the stock price of any given business.
Even rumors can make a stock fall off a cliff. That’s why anyone day trading for a living will use stop losses, trailing stops and profit targets.
Cons of Day Trading for a Living
As you can see, removing risk is as important as anything for day traders. And that’s because there’s so much of it.
According to the U.S. Securities and Exchange Commission, day traders typically suffer severe financial losses in their first months of trading. And many of these individuals never graduate to profit-making status.
This is because day trading for a living is an extremely stressful and expensive full-time job. And speaking of expensive: The legal minimum balance required to day trade stocks is $25,000.
That’s a lot of capital to begin with. And it’s clear you need money to make money as a day trader. Even day trading on Robinhood is a process.
The balance requirements will push many investors away from day trading, but time is another hindrance that cannot be understated.
Day trading as a hobby is a recipe for disaster. In fact, this should be treated as a full-time job.
It requires long nights and early mornings of intensive research and analysis. You need to scour the web for every tiny bit of information you can find to ensure you’re making the right decisions.
Even after closing, anyone day trading for a living needs to assess their transactions and begin their research for the next day. It’s a continual process that will cost you countless hours in front of a computer.
Growing Number of Day Traders
There are currently more than 13 million day traders around the world. And this number is sure to grow as the interest in investing rises. It certainly has its perks, and becoming your own boss is one of them. But every decision you make can break the bank if you aren’t on top of your game.
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About Corey Mann
Corey Mann is the Content Manager of Investment U. He has more than 10 years of experience as a journalist and content creator. Since 2012, Corey’s work has been featured in major publications such as The Virginian-Pilot, The Washington Post, CNN, MSNBC and more. When Corey isn’t focusing on Investment U, he enjoys traveling with his wife, going to Yankees games and spending time with his family.