Stock market participants are often broadly divided into two categories: investors and traders.
Although both are technically investment-oriented, it is the line that tends to be the biggest dividing line. Investors often have longer time horizons, sometimes holding stock positions for years. Towards the other end of the spectrum, day traders lie.
If you’re interested in becoming a daytime trader, here are some things to keep in mind:
- What is daytime shopping?
- Why might you want to become a trader?
- What are the risks of day trading?
- Requirements for daytime trading.
- How to be successful in day trading.
What is daytime shopping?
In the strictest sense, a day trader is someone who opens and closes positions during the trading day instead of spending more time for them. During a day, trading time spans can vary widely, including durations of one minute, one hour, or several hours.
Instead of focusing on the basics of the company, traders pay more attention to the technical charts, what the stock price is doing at the moment, and how it has historically behaved under certain conditions.
For example, a day trader can buy a position in a bankrupt company simply because there is an upward trend in a particular day, says Gust Kepler, CEO of BlackBoxStocks (BLBX).
Why would you want to become a day trader?
People tend to be tempted to trade because they see their boyfriend making money, says Nigam Arora, CEO of The Arora Report.
Successful traders can work more on their laptops from home in the morning than they do 40 hours a week, says Kepler.
“It can be very rewarding for people who are learning to do it,” he said.
What are the risks of day trading?
While there are commercial success stories, the reality is that most people fail.
Kepler estimates that only 15% of day-to-day traders are successful;
Aurora puts that figure much lower, saying that maybe 1% to 2% are really successful.
If you trade long stocks on a daily basis, the risk is that “you will lose all your money,” says Aurora. “If you try to reduce the market, you can lose even more. Your negative risk is unlimited. ”
Day traders run the risk that they will not make enough money to cover the extra transaction costs that come with a larger volume of trades.
“Academic studies of traders around the world have consistently found that the vast majority of day traders are unsuccessful,” said Robert Johnson Onson, a professor of finance at Creton University. “The central message was that trade is dangerous to your wealth.”
It can also be a psychological risk for a trader if it is combined with a gambling addiction that can lead to addiction. Both gambling and high-risk stock trading accelerate dopamine in some people. When the motivation is dopamine-induced haste, investors become gamblers on the stock exchange.
“Everyday shopping will make you richer than a roulette wheel or a blackjack table,” says Aaron Sherman, President of Odyssey Group Wealth Advisors. “And like gambling, the more you do it, the more confident you will lose.”
Requirements for daytime trading
If you want to start the day trading, you need a brokerage account. Brokers are individuals or companies that charge on behalf of their investors for trading.
Day traders are likely to choose the DIY route և they may prefer an online brokerage account or a discount broker that will allow investors to buy or sell investment securities through a broker site or program.
A brokerage firm can also offer a trading platform that displays real-time news, allows traders to look at technical charts, and provides a scan that shows which stocks are making the biggest moves.
Some platforms allow investors to trade online directly through a broker for a fraction of a traditional value or nothing depending on the asset being traded.
Discounts for DIY investors or online brokers include Charles Schwab Corp. (SCHW), Fidelity Investments, TD Ameritrade or E-Trade. Examples of complete brokers include Raymond James Ames Financial (RJF) և Edward ones ons to name a couple.
After purchasing a broker that will be considered day-to-day trading by the Financial Industry Regulatory Authority or FINRA, you will need to finance your account with $ 25,000, trading four or more open-ended shares within five businesses. – These trades should represent more than 6% of your total commercial activity during that period. This is regardless of the minimum broker account, which may be zero dollars, but only applies to clients who trade less than, for example, day traders. There are also special margin requirements to take into account the patterns of the trading day.
That huge piece of change, however, can work in your favor as a trader. If you can afford to buy higher-priced stocks or larger pieces of lower-priced stocks, you can make more money և get more money for your deal when it comes to transaction costs.
If you do not want to save the $ 25,000 balance, you will have to trade three or fewer trades with the same broker in five days, trade in the international market, join a one-day trading company that requires a smaller deposit, open multiple accounts with different brokers or trades with currency, futures or options.
How to be a successful day trader
The most important skill you can have when it comes to daytime shopping is the right temperament.
Successful day traders are on the level, able to follow the rules, even when money is at stake, they know the example well, says Arora. Kepler adds that daytime trading also requires a lot of discipline;
If you feel you have what it takes, then you want to educate yourself. There are many free online shopping resources, not to mention books in the library, so do your homework if you are thinking of paying for shopping.
When you feel like you’re weakening, Arora recommends starting a short – term trade in which you’re in position for a week or maybe a few months. Combine those more forgiving terms with smaller amounts.
If you find yourself succeeding, try to shorten the deadlines until you open and close the same day.
Once you are established as a true trader, you will spend time looking for promising technical patterns և stocks that move a lot, up and down. You can scan titles to see what is driving the market or individual stocks.
Since you can view news և technical charts for many stocks, indexes և other trades, you will probably want to have a home office with multiple computer screens, not to mention reliable high speed internet.
At the end of the day, however, keep in mind that trading is very risky, it does not work for most people in the long run, it can be considered the best hobby for the rich.
“Too often, investors look at 24/7 financial news networks; they are biased, that is, commercial,” says Johnson Onson. “Investment success is easier to achieve by making fewer decisions, investing in buying and keeping.”