Day trading (i.e. buying and selling of financial instruments once or multiple times within the same day) can be lucrative or non-lucrative! It can be advantageous to play with price moves in one day or can prove to be adverse too if you don’t adhere to a well thought method. Stocks have potential to earn phenomenal returns in long term but there are players are in market who are making big fortune every single day! Welcome to the world of intra-day trading. It is a mixture of profits and losses but there is a hope to start afresh the next day!
Whether day trading is right for you or not, is something which is subjective question! It all depends upon potential, knowledge, experience and exposure of investor. But here are few aspects relating to day trading which can help you in taking a decision whether or not it is right for you!
- Requires continuous monitoring: Day trading is not for those who have a busy profession as it requires continuous monitoring of stock market. This means from the time opening bell rings till the time trading session ends, it needs your undivided attention. So if you are into busy profession and have no time to monitor the ups and downs of the market then this field is not for you! Sites like StockTwits can be used to monitor ideas from other traders in real-time.
- Knowledge of stocks: If you are into day trading then you should put your every effort to square your position at the end of day! Hence, it is necessary that you should trade in large-cap and index-based stocks as they are traded in high volumes and are very liquid. This is to ensure that you don’t end up holding those stocks that have no buyers at the end of the day! You would learn this gradually by trading regularly but if deep diving in this field is not your game, then it is better not to enter the streets!
- Invest only what you can afford to lose: The risk involved in intra-day trading is more than risk in investing stocks. So you should invest only that amount which you can afford to lose! If you invest in nominal amounts then there is very less risk of losing big amount. But if you invest too much then an unexpected movement can wipe out your entire investment in few minutes! So need to have appropriate guidance and experience before you put your money into this market of sharks and bulls.
Like we mentioned before, whether day trading is right or not is subjective question! But if you have time to invest, willingness and potential to take risk and knowledge and experience then day trading is right for you! But if you want to enter it just because one of your fellows is making large profits out of it then it can be riskier! But not wrong! In the latter case, you need to be very cautious and gradually work towards increasing your knowledge bank. And never forget to set realistic expectations as they will only help you in taking necessary steps to achieve your big goals.