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What is day-trading?

Day trading refers to the act of buying and selling shares of securities within the same day, with the intention of profiting off of the daily price fluxuations of stocks. It can also include numerous stock transactions, meaning buying and selling stocks multiple times during a single day.

Essentially, this can be very lucrative. Stock prices are very volatile, which means they’re always changing, which in turn means more opportunities for day-traders to make a profit. 

Stockbrokers work by quickly buying stocks when prices are low and then selling them just as quickly when prices are high. They aren’t usually as interested in the long-term value of the companies they buy as regular investors, but that doesn’t mean long-term stock valuation is irrelevant.

However, you should keep in mind that not all stockbrokers are day traders. Day-trading and long-term investing are two different things.

In the past, day trading was an activity only large brokerages and financial institutions took part in. Today, more and more individuals are getting involved with day trading because the internet has made access to the stock market easier.

Since quick trading of stocks is lucrative, it’s easy to understand why you may be drawn towards it. However, it’s important to remember that day-trading is not just a hobby. It’s a tough job, one that requires rigorous training and the ability to research well. In addition, day traders work in a high-stress environment, given the risk of making stock trades and potentially losing money.

Pros and Cons of Day-trading

If you’re thinking about participating in a bit of day trading, you must first understand the pros and cons. Below we’ve listed the most prominent benefits and risks of trading on the stock market.

Pros
• Lucrative:
Day trading, when done right, can earn you a lot of money. If you can afford to invest in the right software and do the needed research, you can make some big bucks.

• Market Environment:
During the day trade, stock prices are very volatile. This means that any slight news in favor of a company can significantly boost the stock price, and if you sell your stock then, you can earn a lot.

• Fast Results:
Because day trading happens in a short time-span, i.e., one day, you get your performance results quite fast. By the end of the working day, you’ll know how you performed and whether you made a profit. This means you can quickly learn from your behavior and improve your mistakes.

Being able to quickly compound returns gives day-trading a huge potential for profit, but be careful because losses can compound quickly just as easily.

Cons
• Expensive:
To increase your chances of making the most lucrative trades, you need to purchase the right software and access the necessary financial information. This sounds relatively easy, but it will cost you some money. Even if you use a free trading platform, like Webull, and don’t pay for level 2 market data, you’ll still need capital to use in the first place.

• High Risk:
Just like making the right trade can earn you a lot of money, making the wrong one can cause you to lose all your money. That’s why day trading is very risky.

• Market Environment:
Market environment can also be a disadvantage in day trading. The slightest bit of bad news can cause stock prices to plummet, and you may end up taking losses.

There are SOME protections against extremely fast price drops in the market, but realistically, the stock market can, and will, change rapidly and the only thing you can do about it is to be prepared.

Day-Trading FAQ

Here are the answers to some of the most commonly asked questions about day-trading. If you have any more questions and would like to see them added, please let us know by leaving a comment below.

Is day-trading safe?

If you know what you’re doing, and have back-tested your trading strategy, then trading can be fairly safe, but it can easily turn into gambling if you aren’t careful.

Where to practice day-trading

If you need to practice your day trading, there are a number of apps that will allow you to paper-trade. This means they basically give you a fake account with fake money and you test your trading strategies.

If you’re good at day-trading, some brokerages will have paper-trading competitions and fund the winner’s trading account, or reward them somehow, so if you have trading skills keep your eyes open for these kinds of offers.

Investing apps like Webull, and Thinkorswim, as well as professional-grade trading platforms like Ninjatrader and Tradestation offer paper-trading, but not every brokerage offers it.

Can day-trading be a job

If you treat day-trading like a business and put in the effort to learn how to properly trade, and you spend the time to do it, then yea, sure.

The problem is, if you only day trade casually, you’ll most likely never build up the skills required to become a successful trader, so either learn everything you can and give it a real effort, or don’t even bother.

Which day-trading indicator is the best?

Realistically, no-one can answer that question for you. You have to find out which indicators work for your specific strategy and learn how to use them.

There isn’t a magical indicator that can do all the work for you, so don’t get lazy!

How do day-traders find stocks to trade?

Everyone trades stocks differently, so each trader will likely have their own way of choosing a stock to trade.

Typically, day-traders rely on a lot of technical analysis, like charts and graphs, or even a mix between technical analysis and fundamental analysis.

Some traders simply read Reddit and try to trade whatever stock everyone is talking about that day. Some traders look for a pattern on the stock charts. 

Obviously, certain trading strategies are going to work better than others, so part of the challenge is finding a reliable system for finding high-quality stock picks.

You’re going to have to try some things out and keep track of your results. This will help you understand what approaches work and don’t work for you.

What's a good book to learn about day-trading?

There is plenty of high-quality literature out there if you want to learn about making money, but if you want to curl up with a good book and learn a few things, try checking out this book about the ups and downs of Wall Street:

A Random Walk Down Wall Street -

Disclaimer: We receive a commission if you purchase this book. This doesn't cost you anything, it's just our payment for promoting the product.

What's a good Youtube channel to learn about day-trading?

I personally like watching Jared Wesley’s channel, called Live Traders. I find his videos to be fairly honest and really informative.

Check him out here:

What days of the week can I day-trade??

The stock market is open Monday-Friday, so it is closed on weekends and holidays.

Any day other than that, the stock market is open and ready to be traded.

 

Thank you and trade carefully!

Day-trading is considered pretty risky, so don’t just jump into it with your entire life savings.

As a matter-of-fact, if your trading portfolio has under $25,000, you’ll have a hard time day-trading at all because you can typically only do 3 day-trades per week until your portfolio exceeds the $25,000 threshold.

Be safe, and thank you for reading! Have a great day.