Day trading has become huge among investors today. More and more, investors are turning to their investments to provide financial stability in lieu of a traditional career that steadily drains the life out of us.
That is not to say, however, that day trading is for everyone. Some people don’t want to risk their hard earned savings, while others fall into the alluring (but ultimately devastating) traps that come along with day trading, losing it all rather than building a strong financial future.
If you want to get involved in day trading, you should understand some basics before you begin.
Why day trading?
The world is changing; more people are working multiple jobs today than in recent memory, with a massive 59 percent of millennials participating in the “side hustle” economy. This is a dramatic shift from “the grind” that shackled our parents and grandparents, forcing them to dedicate long hours to multiple steady jobs just to pay the rent or gas bill on time.
Today, the activated workforce spends their extra time and energy competing in the ecommerce or handiwork spaces in order to supplement their disposable income, or add to a savings portfolio. Investments are an often cited source of this extra income, but this strategy to maximize one’s personal finance is dwarfed in comparison to other avenues for increased cash flow.
Yet investing, and particularly utilizing an aggressive, daily trading strategy, serves this purpose admirably. Day trading allows for that extra cash to work for you rather than sit idly by, waiting for an emergency to wash it all away.
Know your market
The first thing to know about day trading is the restrictions placed upon individuals in various markets. For instance, the minimum portfolio value you must command is a sizeable $25,000 to make routine portfolio shifts every day on the traditional stock exchange.
This may be a prohibitive mark for many people, so day trading crypto or forex might be more viable options. Even if you do have access to the capital necessary for day trading stocks, a bad day of losses could knock you down below the maintenance requirement. Then you will be barred from engaging in daily until your portfolio regains that minimum threshold.
However, Forex trading can be done at any price point. But the usual recommendation is to maintain a balance of at least $500 — far below the lofty goal set by the traditional stock market.
Do your homework before trading
Brokers nowadays offer test accounts in which you can buy and sell stocks or commodities in a practice setting before entering into the real market. Learning the ins and outs of the commodities you intend to buy into can make or break your investment strategy going forward.
If you don’t take the time to learn the swings of the market or how to read external factors that affect your holdings, you can’t expect to draw much profit from your investments. Taking time to learn how to read the market is critical to your future successes.
Build and maintain your trading fundamentals
Building solid fundamentals is the most important aspect of your trading game. The main problem that early traders face is a willingness to throw away their principled approach to commodities when they see a stock or price point that they like.
By not allowing yourself to get greedy, or to sell in a panic when the price dips, you can mitigate both losses and missed opportunities. Learning to read the market, and then acting on your instincts will make for a principled strategy that minimizes bad trades that are borne out of misplaced optimism.
Day trading can be an excellent source of supplemental income, but this side hustle takes some getting used to. You will need to prepare for the fast paced world of finance and learn on the job, but those who can hack it will find themselves making a healthy profit week after week and eventually year upon year.
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