In this article, we will explore what day trading is and how it differs from normal trading in the stock market, as well as various day trading myths. We will look at what it means to be a day trader, how common it is, and mainly what people think about day trading is that is wrong – i.e. the myths, and what you should believe and not believe about them.
Day trading did not used to be a possibility, trading in fact for the average person did not used to be a possibility until the rise of modern technologies! In past times, only those that had a connection or worked for large investors or financial institutions such as brokers and banks were able to invest. When the internet was developed, the world of stocks and shares and buying and selling was one of the first to be affected, and considerably too! After stock brokers expanded online and offered the possibility to buy and sell shares online, it became possible for anyone that wanted to trade to do so. Most people have access to the internet and therefore the stock market, meaning that they can trade if they would so like at any time!
Day trading however is not just regular trading, in which one might simply purchase a stock and wait some amount of time before selling it, and could quite possibly sell it when the time is very right or when the time is very wrong. Day trading, put simply in terms of the stock market, is the act of purchasing and selling stocks within the same day with the hope of making money on them.
Experienced day traders will know exactly what market trends to look for, and how these market trends have an effect on prices of stocks and shares. Day trading can be a valid source of income for many people – should you become knowledgeable on it, it can allow you to work from home and to do extremely well should you make the correct investment decisions. If one is to become successful at day trading however, it is essential that one has planned and that they know in advance the securities which they are going to be looking to purchase. It is also essential before you decide to become a day trader that you have an amount of funds which you are willing to lose, as the possibility of this happening during the learning process is considerably higher.
This article aims to explore some common day trading myths that you should know before you start investing, as well as why you should know they are simply myths and why you should ignore them should you wish to become a successful day trader!
Large initial investment – a common myth that surrounds the practice of day trading is that of a lot of people that are uninformed thinking that, in order to start and to become a successful day trader, that a large initial investment and availability of capital is a requirement – this is not the case however! It is easily possible to become a good day trader with a much smaller amount, as little as a couple of hundred dollars! What is important is that you know exactly how to use that money that you are starting with, and how to turn it from the couple of hundred dollars into a couple of thousand dollars! It used to be true that large amounts of capital was required in order to enter properly the world of day trading. Now however, stocks can be bought for pretty much whatever you can afford, and, assuming you learn the markets and purchase the right stocks, you can do very well starting from any amount of money!
It’s not hard – day trading is most certainly not easy! Many experienced traders may say that it is, but so would many experienced guitar players for example! It does not mean that the learning process is easy, it means that the learning process is difficult and that you will go through many failures before you get to the position that you really want to be in. Day trading is not something that you can simply start in one day and expect to be successful at by the evening of the same day! It is paramount that, if you are to become successful, that you know how the stock market works and what to look for before putting out your hard-earned money.
It will give you immediate wealth – day trading Is not a get rich quick program! As aforementioned, becoming a good day trader will mean that you inevitably experience a considerable amount of failures before you see any profit! You could be operating at a loss for a considerable period of time.
It is the same as gambling – day trading is most certainly not similar to gambling if it is done properly – it is quite the opposite, it is based on judgement and analysis of the market as opposed to placing a bet on and hoping for the best outcome. Of course, day trading could of course be seen as gambling if one were simply to be buying up various stocks without any prior knowledge of them and hoping for the best! This would not be day trading however as some people may think – day trading refers to a proper practice, not a hope for the best!
It requires that you invest money in a huge amount of stocks – this is not true. Many people think that in order to make a good amount of money practicing day trading that one must invest in a variety of different stocks in different areas of the market. This is not the case. It is actually more wise to focus your efforts on a more particular area, as learning about those stocks that you are investing in can give you a vital advantage over other investors. If you know the market in which you are investing, you will be able to make more sense of the news that comes out on that market and to invest accordingly.