Advantages of Day Trading
If successful, the rewards of day trading can far exceed the risks. Day trading requires discipline and time management, but it also affords an individual to make their own hours without a manager or boss standing over their back. And, in addition to the amount of money an individual can make form the comfort of their own home, day trading offers individuals many advantages they will not encounter in the more traditional forms of trading stocks and other financial instruments.
The following are some of the key advantages to becoming a day trader:
Free Information and Resources
Obviously, like any industry, there is a lot of study and knowledge to acquire before sitting down in front of your computer and executing your first trade. However, an individual does not need to be an expert in the fields of investing. There are an abundance of free resources on the Internet – and at your local library – that can help you being your day trading career. Of course, you can purchase day trading software (which can run you $20-30K) that can provide you with instant news, charts, and stock information, but if you are just beginning, this could be a mistake.
Many websites offers individuals the opportunity to practice and learn day trading on demo software for free or a small fee (nobletraders.com; millennium-traders.com).
You are your own boss
Just imagine: you are quietly working from home on your computer, executing trades, sipping your coffee, but something is missing: your boss or manager breathing down your neck. You are your own boss. You don’t need request permission for trades; you don’t need to meet someone else’s demand; you are in the game for yourself. When it comes down to it, you are responsible and accountable for your performance. If you fail, you lose money; possibly a very large amount. As much as we would all love this freedom, it does remind you that you need to have the self-discipline and work ethic to know the business well.
No Overnight Risks
One of the best advantages of day trading is ability to close your position at or before the end of the trading day. For a day trader who opens and closes his position before the trading day ends, the risks of holding a stock overnight are erased. A traditional trader’s profits can disappear overnight with traditional, long-term trading, but with day trading your profits are secure as long as you close your positions before the end of the trading day. This allows you – if it was a good day – to sleep soundly at night.
No overnight crises or calamities in the financial markets can affect your income for that day.
Success in Bad Market Conditions
Day traders can often take advantage of a struggling market by utilizing short-selling trading strategies to take advantage of falling stock prices. The ability to make money off of the stock market in bear market conditions is a tremendous advantage for a knowledgeable day trader.
Focus on Technical Analysis
There are two types of analysis that most traders and investors look to for financial information: technical analysis and fundamental analysis. Traditional, long-term traders have the opportunity to focus on a company’s fundamentals – company health, financial statements, and management information – to see how its stock value will change in the long run. Although this is important information to know, day traders can focus on technical analysis throughout the day to make successful, and quick, transactions, resulting in profits. This is because a day trader is primarily concerned with what is going on at the present moment; what the price of the stock is now; what its volume is, and what its volatility is at the present moment.