Day trading is the buying and selling of financial instruments in the space of a day. The US Securities and Exchange Commission considers a day trader to be one who makes four or more day trades within five working days and this is more than six percent of all the person’s trades. Day trading is extremely alluring: you set your own hours, you are not restricted to a single location, you will never be fired or made redundant, you can take a holiday at any time, you can work from home, you are your own boss and you may well earn vast sums of money. It may not have been your childhood dream, but many people adopt it later in life. If you would like to attempt it, you can open a spread betting demo account.
In the late 1990s, day trading was a path to easy money. Between October 1998 and March 2000, the Nasdaq Composite Index rocketed from 1,344 to a record high of 5,132, and day trading spread bettors continued to make money as it plummeted to a low of 1,108 in October 2002, losing 78 percent of its value in 31 months. The bubble has now deflated.
Alas, most people learn that they are unsuited to day trading only after the fact. Day trading is not for you if you would prefer an occupation where you can operate at a relaxed pace. Most people who act as day traders rapidly discover that the practice requires much attention to minor details, which can cause the loss of a considerable sum if neglected.
Day trading is likely to not suit you if basic mathematics sends a shiver down your spine. It is at least true that it is possible to overcome an aversion to numbers without massive effort.
A day trader must be comfortable with technology. If you have no idea where the internet is located, you should not aim to be a day trader. Dial up connections should be avoided at all costs, as they belong to prehistory. Most successful day traders are permanently in possession of a device that allows them to connect to the internet.
You should have the time and inclination to research. A survey of 300 investors by Insight Express in 2002 found that 33 percent lacked the time to conduct sufficient research into their trades and 28 percent admitted that analysing markets was beyond them.
A fair amount of money is required for day trading, and this must be discretionary – you can afford to lose it. A day trader must keep informed of the latest regulations, taxes, trading fees and so forth.
If you have shortcomings in any area, these can be suppressed. There are many courses which can be attended online or in person, and there are untold books, blogs and videos. You could work with a winner, sitting in on the sessions of a friend who is successful at day trading. You can study your successes and mistakes and modify your strategy accordingly. Before graduating to day trading, you could try swing trading, holding positions for longer periods. And of course, in the beginning, you should be prepared to take a beating.