| In recent years, day trading has received extensive coverage. Many believe that day trading is a quick, easy way to obtain unimaginable wealth. In essence, day traders buy and sell stocks rapidly with the hope of making a fast profit. Nearly all day traders utilize some type of on-line investing service and, quite often, day traders invest with borrowed money.
How Does One Become a Day Trader?
Certainly, there are numerous courses and seminars available on day trading. Many advertisements for such courses and seminars make wild claims of success. The courses are often expensive. In actuality, however, an individual needs nothing more than a computer with a connection to the Internet in order to begin day trading. The practice of day trading is not illegal or unethical.
What Are The Risks Of Day Trading?
The most significant risk of day trading is that of large financial losses. The success of a day trader depends on market fluctuations. Such fluctuations are not easy to predict, nor can they be predicted with any accuracy. A good rule of thumb for a day trader is to only use money that can be lost without any consequences to daily living.
Another risk of day trading is that the demands of day trading itself are extremely taxing to an individual. Day trading is more than a full-time job. The prices of stocks do not necessarily stop fluctuating at the close of trading on any given day. With after-hours trading and trading on foreign exchanges, a day trader could easily work around the clock in order to make a profit.
Lastly, a day trader should carefully consider the tax implications of his or her activities.
Day Trading vs. Investing
Day trading is not investing! For the most part, investors make careful decisions about investments that conform to a particular investment strategy. While some investors buy a particular investment with the intention of keeping it for a short period of time only, most investors buy into a particular investment with the intention of holding onto it for some period of time. The techniques used in day trading stand in stark contrast to the techniques used investing. Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |