Day trading can be a fun way to make money if you’re a calm, rational person who is able to focus on plans outside of intense emotional moments. More than 90% of day traders who pick up the practice get out within four years because of how stressful it can be. While plenty of people have made their fortunes from playing the everyday rise and fall of the market, day trading isn’t all roses. Take a look at this short list of pros and cons to help you decide if you have the chops to cut it as a day trader.
Pro: Day trading can be done on your schedule.
Day trading can be done on your own time and with just a laptop or a phone and an internet connection. The bar for entry is relatively low, but that comes with tons of caveats. Despite that, day trading is one of the most flexible forms of trading since you’re only seeking to enter positions for a day or two at most. You’ll have to stick to the schedule of the market you’re planning to trade in, but given that there are markets all over the world, you can find one to trade in no matter the time of day.
Con: Despite the low barrier for entry, the skill wall is real.
The best day traders are experienced traders who understand how to weather both bullish and bearish markets. As a beginner, you won’t have that experience. You’ll make mistakes that any seasoned veteran would scoff at, and tell you how to avoid going forward. You should persevere through these learning moments and remember to manage risk and keep a diverse portfolio to keep costly mistakes from happening. When asked, most successful day traders have said they felt as though it’s taken at least a year to get comfortable with the market. You should expect to make the same amount of time investment to get a return on your money as you learn. There are thousands of resources that can help you get a better grip on day trading indicators.
Pro: You pick your risk profile yourself.
Day traders get to pick their own hours and decide how much of their money they’re willing to stake on a particular call. This flexibility is great for anyone who doesn’t like being managed or told what to do in a regular job. The downside is that you have no outside input for any trades you may be considering. Many day traders take part in online communities to discuss the day’s activity. It’s recommended that day traders stay on the cutting edge of the news cycle, so joining a community dedicated to day trading can help you hear news quicker than the mainstream media may be able to report it.
Con: You are at risk of losing your money.
Make no mistake, no matter how sure you are that the trade you’ve placed will pay off, day traders often lose money. You’ll see day traders discussing their win/loss ratio the same way sports and some professional video game players do. Day traders count their successes in win percentages because it’s inevitable that you will take a loss at some point. Those situations are where accurately managing risk and diversifying your holdings pays off.