The basics of day trading and who can do it

Published July 26, 2021   |   

Any money-making strategy is likely to be difficult when you’re first getting started. If buying and selling securities for a massive profit was as easy as mindlessly tapping buttons on your smartphone screen – everyone would be doing it. Although specialists can often make this industry look simple, that’s because they’ve had years of training and practice.

This is why it’s so important for anyone thinking of opening an account and growing their wealth portfolio to recognize the effort required in being successful. Taking an active approach to investment with a strategy like day trading, shorting stocks, or margin trading can be an extremely lucrative way to make some serious money. Some people even give up their traditional jobs to watch the stock exchange full-time and make profits off what they see. However, it can also be extremely challenging for novices to get started – especially if they jump in without knowing what to expect.

What Kind of People Approach Day Trading?

If you’ve looked into investing and making money off securities in the past, you’ll know that day trading for beginners is just one option for those who want to take an active approach to selling. You can still be active and focused on your own portfolio without trading every day. This route tends to appeal most to people who are happy to move in and out of positions on a regular basis to generate the best profits long-term. There’s a good chance that if you’re thinking about taking the day trading route, you’ve already got some idea of what it means to shift in and out of positions each day. You might have explored things like scalping (making profits on smaller price changes through the day), or range trading, which involves examining support and resistance levels.

Day traders learn fast and move fast to gain as much knowledge in the marketplace as possible. They’re level headed about their decisions, and only risk capital they can afford to lose. This helps to reduce the risk of financial ruin, while preventing emotions from getting in the way of difficult decisions. A successful day trader will also need an edge over the rest of the market. There are many different strategies available for fast-paced buyers and sellers today, including arbitrage, swing trading, and keeping on top of the news. These strategies aren’t something a standard day trader will choose when they first get involved and never build on. You’ll need to constantly learn and improve your skills.

Can Anyone Get Involved?

The best people suited to day trading are those with a strong eye for their chosen market. If you feel like you can immediately pinpoint when something’s going to rise or fall in value, and you can make quick decisions without being overwhelmed by stress, this could be the area for you. The good news is you don’t necessarily need a lot of cash to get started these days. You can see this video for evidence on how you can get started with an account with as little as $500 as an initial investment. As your strategy continues to grow and you feel more confident in your risk level, you can even start exploring new strategies to reduce your initial investment, like shorting stocks, or even using margin accounts to expand your earning potential.

This method of investment isn’t about getting rich quick, although you will generally see the results of your efforts faster than if you were to hold positions for a long period of time. Instead of making big wins every so often, you see the value of your purchases by selling securities regularly. It may surprise you to learn that many financial advisors and professional money managers won’t actively focus on this form of trading, because it requires too much commitment on a regular basis. You’ll also need to be aware of specific rules and restrictions, like the pattern day trader rule. You’ll also need to make sure you have a few essential tools, like:

  • A trading desk where you can move in and out of positions every day
  • Analytics software to help you identify technical indicators in your market
  • Multiple news sources for stocking up on useful information
  • A quick internet connection for making faster decisions
  • Brokerage tools like market margin accounts

Should You Day Trade for a Living?

Before you jump in, it’s important to make sure you have the right attitude for this kind of market. Many professional traders working on a daily basis often say they lose money when they fail to make decisions that meet their own criteria. The best results come from regular, reliable planning. You need to have a strategy and be willing to stick to it. In order for these professionals to profit, they need the market to be volatile. Markets that work best for day trading are the ones that move during the day, due to factors like economic news, investor sentiment, and business growth. You’ll also find it’s much easier to make cash in an environment that’s highly liquid, as this will allow you to buy and sell at the correct times.

If you know the markets most suited to you and you feel like you have the right mindset, it might be tempting to jump in immediately. While you can always quit your job and pursue your investment interests, most experts recommend starting small. Experienced professionals can certainly pursue the day trading landscape to earn a living, but you won’t want to quit your day job before you know you can make a profit. The good news is you don’t have to go all in right away. Brokerage apps and tools on the web should allow you to start small outside of your working hours, by choosing a set couple of hours each day when you focus on your chosen market. The more you develop your skills and your strategy, the more you’ll be able to determine for yourself whether this is the right full-time career for you.