Hearing people brag about making money through day trading makes you wonder if you could try it some time. You wonder whether you can succeed in becoming a day trader and make money just sitting in front of your PC. Well, here are some things you need to know about this type of trading.
The first thing is to understand what day trading actually involves. It refers to carrying out a purchasing and selling action in a single day. People do this online. They get to their laptop in the morning, purchase a security and then sell it after a few hours or sometimes at the end of the day. Now before you begin daydreaming, understand this: a big win in day trading is, many a time, followed by a loss. And it isn’t something you can actually make a living from initially. The SEC (Securities and Exchange Commission) warns that day traders usually suffer financial losses in the initial months of their trade.
Day Trading is Different from Investing
Now let’s get to the business end. Day trading and investing are two different things though they both deal with stock trading.
- Unlike day trading, investing involves the trader holding the stock for the long term.
- Investors usually buy stocks of companies they consider are financial healthy and then wait over the years to see those companies generate positive returns. They wait.
- When the returns are positive enough for their stock prices to rise, investors sell them and make profit.
Day trading, as you’ve seen earlier, is nothing of the sort. The buying and selling are done in just a few hours, and day traders ensure they sell the stocks immediately following their purchase so that they do not lose money.
And while this means you can make big money in a single day if you’ve purchased the right stocks, you could also lose big money, as has happened with many investors whose lives have then taken a turn for the worse. Day trading may often seem like gambling, though it isn’t, because it’s quite fast and, as you keep analyzing the market, you realize that things take a turn for the better or the worse in just a matter of minutes or even seconds.
Sticking to Your Strategy
The key to avoiding nasty surprises in daytrading is to maintain discipline. That’s how you can make money without losing more. Don’t let small successes make you take big risks. Keep your feet on the ground, have a business plan and stick to it. Your plan should include your targeted earnings for a year and also how much you’re mentally and financially prepared to lose. And don’t worry if you lose money on some days, since you always have another day to make it up.
But beyond this you really must learn to read charts which are diagrams telling you the way in which a stock moves. With knowledge of charting, you would have a better idea of what you can predict in terms of the rise or fall in value of a stock. It is in matters such as these that signing up with an online broker dealer can help. A user-friendly trading platform coupled with educational resources that help you learn how to study charts would be very useful to learn stock market strategies.
At TradeZero we offer all these services plus commission free trading, meaning that you get to maximize your earnings without having to pay for commissions for each trade you make.
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