In this video, I’ll share with you some pros and cons of day trading. Also, I’ll give you some words of wisdom, and some things you need to be aware of when it comes to day trading. Because a lot of people don’t really share the details behind day trading, or maybe they just don’t fully understand what’s going on underneath the surface.
Some of the advantages of day trading are:
There’s no overnight risk, meaning you’re not holding a position overnight. And if there’s an event during the night that affects the market in a negative way, you don’t have that risk.
Also, earnings are compounded much faster. You can take the money that you made from your previous day and use it again for the next trading day to potentially make more.
Another thing is that there are more excitement and an emotional rush. Many people like day trading because of this. However, all of these are beginner type of advantages. Let’s look at some disadvantages.
Not all conditions are great for day trading. Many people want to go into day trading, but the conditions in the market are not always set up properly or correctly to day trade, and it is not ideal.
Support and resistance levels are not well defined, which is not a good thing when doing technical analysis.
It’s really stressful due to the attention requirements. If you’re a day trader, you need to be sitting in front of the computer screen for a long period of time, and this probably will drain you, as far as your quality of life.
Another disadvantage is that market hours don’t work for everybody. If you’re doing day trading and you have a day job, it’s going to be very difficult, because you’re going to be busy during market hours. Whereas if you’re swing trading, you don’t need to be all the time in front of the computer screen, since you don’t have to focus on those micro-movements.
And finally, when you are day trading, the commissions add up extremely quickly. Because you’re putting on a lot more trades. Some people put in tens of thousands of dollars just in commissions because you just have to trade so much. So if you’re day trading, be sure to call your broker and negotiate your rates.
A lot of people want to day trade, and a lot of this has to do with our emotional greed. We’re going after the money.
That’s not necessarily bad; the problem is that if you get attracted to the get rich quick lifestyle, more than likely it’s going to bite you back.
Real traders, who know how to make money, they hold on to a position, they have long and short positions, and they know how to hedge to reduce their risk. And you can’t really do this when you day trade.
The other problem is that the market conditions are currently not ideal for day trading. You have a low VIX, so movements have become smaller, which makes it more difficult to day trade.
When you are day trading, you want more movement, you want a higher VIX, to be able to make more money. And recently with all the computer trading that’s going on, the environment just creates less opportunity when it comes to day trading.
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