Day trading stocks has the potential to be a very lucrative profession. But the risks are as high as ever for an investor. And day traders must dedicate countless hours of their time compiling research and surfing the web for financial reports and news releases. In fact, it’s a full-time job.
Is Day Trading Stocks Right for You?
Day trading is not for everyone. It’s commonly known that you can’t take on this type of investing strategy as a hobby. You wouldn’t be able to manage it with a nine-to-five job, much less be successful.
And your success rides heavily on your research. That’s why it requires your complete attention each day. Knowledge is the ultimate power for day trading stocks.
And that knowledge comes in many forms. You first need to have an in-depth understanding of the stock market and data analytics. This alone takes experience as an investor.
There’s also a specific set of rules and regulations for day traders. Did you know the U.S. Securities and Exchange Commission (SEC) has a minimum equity requirement of $25,000 for any investor who is designated as a pattern day trader?
And according to the SEC, a day trader is anyone who executes four or more day trades within five business days. But as the saying goes, you must “have money to make money” when day trading stocks.
You will need to assess your capital and determine how much you are willing to risk on each trade. And you will have to do this on multiple occasions each day. In general, the most successful day traders are only willing to risk 1% to 2% of their entire account per trade.
Tips and Strategies for Day Traders
Using leverage to profit on small price movements is the key to day trading. And this is possible through liquid stocks.
These are stocks that trade enough shares for the holder to sell whenever they so choose. But this requires a high degree of self-discipline and attention to detail.
From market psychology to statistics and market expectations, there’s many day trading strategies to consider. For example, the most common include:
- High-frequency trading
- News-based trading
- Range trading
While each of these strategies has their own set of benefits, they all come with risks. And day trading stocks has significantly more risk than most investing opportunities.
There’s over 13 million day traders in the world today. The majority of these investors are not profiting at all, while others will take months or years to begin turning a profit.
That is why it’s important to use risk management with your strategy. For instance, many day traders use stop loss orders to minimize risk.
A stop loss order will get you out of a trade if the share price drops to a certain level of your choosing. This level of automation can protect your portfolio and help you cut your losses before they spiral out of control. And I don’t recommend day trading stocks without having a stop loss in place.
Investing and Day Trading Stocks
Investors can use online brokerages, and even mobile applications, for day trading purposes. The best day trading platforms will provide you with resources and tools that can enhance your ability to make the right trades. They’re also cost-effective with easy-to-use dashboards and intuitive navigation.
But don’t stop there. Sign up for the free Trade of the Day e-letter below. You will gain immediate access to daily reports and trending stock analysis from some of the most reputable investors on Wall Street.
As a day trader, it is your responsibility to go above and beyond in your research and analysis. This is the only way to produce consistent returns day trading stocks in today’s market.