Day Trading: Unique Risks and Rewards

236

Have you ever considered becoming a day trader? Many people wonder whether the potential rewards are big enough to cancel out the obvious risks of the hectic, high-pressure career. The funny thing about day trading is that there are so many myths about it, most of them negative. The fact is that hundreds of thousands of average working people make a decent living doing it and don’t end up broke or at their wit’s end.

One thing that keeps these trading warriors on track is technology. Most of them have excellent brokerage platforms, know what kinds of technical indicators work best for what they trade, and are extremely smart about money management. For example, you can read a comprehensive thinkorswim review, or a review of another platform to find out what kinds of service, indicators, and customer support the average day trader needs and expects. Most of the top platforms are ideal for traders of all abilities. 

The question for those who want to make buying and selling a daily job is this: do the rewards outweigh the risks? For those who approach it in the right way and with the right tools, it usually does. What are the pros and cons? Here’s a short list of the most pertinent ones to think about before you give up your day job.

Steady Income

It’s fair to say that average day trader has cyclical income. There are no weekly or bi-weekly paychecks, but viewed on a monthly or quarterly basis, income can be steady, perhaps similar to a commission salesperson. The key to earning a steady profit is sticking with the effort, working every session, and having enough startup funds to carry you through a few months of the learning curve. It’s very common for new traders to keep a regular part-time job as a source of reliable income.

Potential Losses

There is the chance that you could lose your entire investment. For those who go into game too quickly and with too many wild-eyed dreams of making millions, it’s easy to overspend, overcommit, and make unwise decisions. The real pros/cons of day trading with TD Ameritrade, for example, can balance out over time. That’s because most anyone can avoid large initial losses by sticking to their own rules, using a platform that has a simulator for practicing, and knowing when to stay out of the markets.

Low Startup Costs

Unless you want to trade traditional stocks on a daily basis, it’s easy to sidestep the high initial balance requirements. For example, forex and CFD (contracts for difference) enthusiasts can do as many transactions as they want without being flagged as a pattern day trader. In essence, when you decide to become a trader, your startup costs can be quite low. Of course, you’ll need money to trade with, but other than that, you might just need some software and an extra computer monitor.

More Experience Means Higher Profits

Expect to spend several months, at least, before you’re turning a regular profit. On the plus side, once you have a year or two of experience under your belt, you might realize you’ve found the perfect career.

Comments

comments