Day Trading

Most financial advisors will give me stern looks for having the heading “Day Trading” in a book for responsible people.  Day traders are viewed by most of the financial world as degenerate gamblers, prone to make crazy bets on stocks (and other exchange-traded financial instruments) and destined for poverty.  That last point will upset the successful day traders out there, but they are a very, very small group!

Most day traders are technical traders.  They depend on the up and down fluctuations in stock prices in timeframes as short as a few seconds.  Most successful day traders utilize sophisticated strategies and equally sophisticated software to make it work.  Some people do make money day trading, but it is a full-time job for them.  You cannot successfully day trade on your coffee breaks and at lunch and expect to do any good.

One of the most expensive aspects of day trading that make it more difficult than swing trading or investing is the fact that every time you buy, you pay a fee to your broker.  Every time you sell, you pay a fee to your broker.  If you are making hundreds of trades per day, then you are paying your broker thousands of dollars per day.  So you make any money day trading, not only do you have to make yourself money, but you have to make enough money for you to profit after you pay all those brokerage fees.

One thing day traders have mastered is technical chart reading.  This set of skills is something that can benefit any trader, and perhaps give you a little bit of an edge.  I recommend against day trading for most people, but, if you are anything other than a long-term investor, I do recommend that you spend some time learning the basics of technical charting.  Charts can affirm your convictions based on fundamentals, and they can alert you to swings based on fundamental shifts known only to the Wall Street elite.


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