Day Trading: Is It Really For You?

Something I found a few students in our last weekend stock option trading course were focussed on was that of Day Trading, perhaps without the realisation of what exactly it entails.

Before deciding which type of trader you would like to become, you need to realise that the quality of your lifestyle very much depends on your chosen trading Style.

Trading can be a very active lifestyle.  Day trading is basically defined as the buying and selling of a security (stock) or derivative within a single trading day, without holding an open position after market close. As a day trader, you would be spending hours every day in front of a computer screen monitoring small movements in price to take quick profits. This style of trading is generally done online with a very short investment time frame.

Because of the high profits (and losses) that day trading makes possible, it is often regarded as a form of gambling rather than investing. Higher risk taking would be closer to the truth and this is a major reason why day traders only hold positions for a few seconds or a few minutes – to limit risk.

You see, a typical day trader would trade the more volatile stocks as they offer greater opportunities to play the price movements throughout each trading session. However, with greater volatility, comes a higher risk and perhaps higher stress levels. Day trading is not a get-rich-quick scheme; it can be very mentally and psychologically challenging and is by no means meant for everyone.

Short term traders, trend traders or swing traders, may profit occasionally from the daily open to close, however they generally make their income over a matter of days or weeks and have an abundant lifestyle in both money and time.

That’s not to say a day trader lacks time, in fact they could easily profit in just a few hours leaving the rest of the day to do what they please, whereas the short term trader has the luxury of placing just a few trades every few weeks, allowing for plenty of relax time.

Like most people who begin trading the markets, you more than likely hold a full-time job that funds your current lifestyle and financial commitments. Attempting to day trade may not be the most realistic choice. Learn to walk before you run.  

Most people on the outside perceive the trader as being glued to a computer screen all day in a stressed out environment, however those people who trade from home know it can actually provide a consistently rewarding career in a very relaxed atmosphere.  The ability to be your own boss and do what you want with your time easily beats the consistency of a 9-5 job.