Day Trading
THE BASICS
Day Trading is the practice of buying and selling stocks or other financial instruments during the course of the same day. It is most commonly done with stocks, although there are also many traders who day trade commodities, options, and other instruments.
With the advent of the Internet and other advances in trading technology, day trading has become very accessible. This can be both a good and bad thing. It is good because it has levelled the playing field, and many small traders now have a chance to make a healthy profit. It is bad, on the other hand, because many new and inexperienced investors who have no business trading often get in over their heads and lose a large sum of money.
It is commonly believed that as much as 90% of day traders lose money. This may be accurate in the short run, but in the long run I personally believe almost all day traders lose. I say this because I have never met a successful day trader. The best ones I've met made about the same return they would have made had they simply opted for a long-term, buy-and-hold strategy.
WHY DAY TRADERS LOSE
I have studied dozens of day trading methods, and have come to the conclusion that most day traders lose because of one thing - personality. Too often, a trader would select a system that worked for someone else, and assume it will work for them. This is not true because each trader has a different personality and psychological makeup. And the unique psychology of the trader makes them react differently, often getting in the way of good decision making. So in order to succeed, you must first understand your own mental strengths and weaknesses, and select a system that complements your personality.
SHOULD YOU DAY TRADE?
Unless you are absolutely convinced you will love the day trading lifestyle, and have at least $25,000 you can afford to lose, I would not recommend you try it. Day trading can be stressful, emotional, and costly to learn, and I believe there are much easier ways to make money.
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