You’ve seen how movies depict day trading — the nervous investor hunched in front of his computer, ready to make the biggest deal of his life, living through extreme highs and lows.
But is this what day trading really is? Below, you can read our comprehensive on this investing technique. We’ll explore its benefits, drawbacks, and how you can try it for yourself.
What Is Day Trading?
Day trading involves buying and selling securities within a single trading day. There’s no buying, holding, and patiently waiting. It’s most definitely a short-term game.
Day traders take advantage of small price fluctuations among highly liquid securities.
Pros & Cons of Day Trading
Day trading may sound enticing. It can produce excellent earnings in very short periods. However, great rewards don’t come without significant risk. Learn about this technique’s pros and cons:
- You’ll have instant results: Day trading provides instantaneous results, so you’ll know your gains (or losses) with little to no waiting.
- There’s no overnight risk: Whatever you make (or lose) by the day’s end is resting in your account. You don’t have to dread whatever the stock market’s condition will be in the morning.
- You’re your own boss: Does working a nine-to-five office job sound miserable? You can move your “office” to your phone or laptop and become an active investor. Work when you want to and make money on your own terms.
- It requires a lot of upfront capital: You’ll need a minimum of $25,000 to legally day trade in the U.S., which isn’t exactly chump change.
- Your success depends on the market’s current state: Is the market stagnant and not moving largely upward or downward? You’ll likely have a hard time making profitable sales and securing cheap purchases.
- There’s a steep learning curve: To experience success, you’ll need a solid understanding of the stock market and a lot of discipline to stick to your strategies.
Day Trading Strategies
Day trading is an art rather than an exact science. You’ll have to experiment to find what techniques will meet your financial goals. However, you may use these strategies as a launching point:
- Assess your risk level and only invest what you can afford to lose
- Focus on one or two securities to get the hang of things (don’t spread your focus too thinly at first)
- Stay away from most penny stocks, as they can quickly become illiquid
- Use limit orders to minimize your losses
- Don’t let emotions affect your buying and selling decisions
Day Trading — What Assets Can You Buy & Sell
Multiple asset classes offer excellent income potential. Here are some assets you can buy and sell daily:
Bitcoin may be the first cryptocurrency to come to mind, but it’s not the only one available.Brokers are making it easier than ever to buy and sell these altcoins on a short-term basis. These altcoins are quickly gaining traction:
You can buy stocks in individual companies and then sell them just minutes or hours later. The same strategy may apply to an ETF, or Exchange Traded Fund (a collection of multiple stocks).
If you speculate stock prices via spread betting or CFDs, you can even benefit from falling prices.
Binary options are pretty risky, but you can make some serious gains if you know how to trade them. Basically, you agree to a predetermined payout or nothing at all, depending on the market conditions. If you want to minimize a loss or secure a profit, you may opt-out of a binary option before it expires at the end of the day.
You can buy and sell items like food products, natural gas, oil, minerals, and metals within the same day.
This asset class may seem a bit intangible, but hear us out. When you buy a future, you’re betting on the future price of a security or commodity.
Day Trading vs. The Alternatives
There are three different techniques we’d like to compare to day trading:
- Swing trading: This technique involves selling and buying assets over several days or weeks.
- Position (long-term) investing: Picture your stocks, bonds, real estate, and other investments you plan to keep for the long term. With this kind of investing, you won’t care about slight price fluctuations.
- Robo-advising: Robo-advising is when you hand over your money to a company and let an algorithm decide where your money goes. It’s similar to long-term investing, but you don’t pick your own assets to purchase and sell.
Conclusion — What Day Trading Platforms Can I Use?
There are many trading platforms you can use to buy and sell securities daily. TD Ameritrade, Fidelity, Interactive Brokers, and Robinhood are all famous names among active investors.
However, the best one we can recommend is called eToro. eToro is an incredible platform that offers the following benefits for day traders:
- Lets you match professionals’ buying and selling moves
- Has low, transparent fees
- Supports a user-friendly app and desktop platform
- Grants you access to more than 2,000 assets
Even if you’re only a beginner, eToro can help you thrive as a day trader. It’s definitely a risky career, but it will ultimately lead to fast returns if you’re patient and follow our strategies above.