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Day Trading
The evolution of today’s instantaneous, always-on communications technologies has brought with it a flurry of new terms, both technical and fanciful. We have specific terminology like “Ethernet” and “802.11b/g wireless” on the one hand, and such expressions as “virtual worlds” and “cyberspace” on the other. The relatively innocuous sounding “day trading” is one term that sounds a lot more casual than it really is.
With the empowerment provided by high-speed Internet and cheap, fast personal computers also comes a tremendous capacity for both creation and destruction. The right tools in the right hands will result in the construction of skyscrapers, the founding of new companies and the creation of fortunes both large and small. A tool like day trading, where an individual investor can (hopefully) research investment opportunities and then execute buy and sell orders with a mouse click, can do all of these things. It can also deplete bank accounts and destroy futures just as quickly.
The sensible approach
There are obvious advantages to these powerful tools, but tools can be used both wisely and poorly. Everyone who attempts day trading needs to remember the old saying, “It’s a poor carpenter who blames his tools,” because there is no one and nothing to blame if things go bad. You are responsible for your own decisions, no one else, so you need to be realistic, above all, if you want to try your hand at day trading.
Fortunately, the overwhelming majority of firms offering Internet stock trading environments do so in a very responsible way. Depending on the type and cost of the service, you can get everything from basic research assistance to the same comprehensive data that professional stockbrokers rely on. Someone new to day trading would be well advised to get as much help as possible, and should consider leaving the trades (and even some of the decisions) to a trusted financial advisor.
Veterans do it, too
Of course, if you are financially astute, have time to keep up on all the research and market reports, understand the risks and do not put all of your eggs into your “day trading basket,” you can do quite well. You can also do all of these important things and still suffer losses, since there are no guarantees. The best day traders are disciplined, consistent and do not take any unnecessary risk unless they can afford the possible loss.
Veteran day traders are overwhelmingly male, mostly with a business or financial background, but otherwise represent a wide range of attitudes, abilities and net worth. Among the successful ones, day trading is absolutely not a hobby, but a serious, disciplined part of their life and livelihood. It is no place for amateurs or hobbyists.
The learning curve
If you want to become a serious day trader, you will need to do what people do in any subject area, and that is study. Depending on how much time and effort you devote to it, you can elevate your day trading from a hobby to an investment strategy in a relatively short time. One of the best ways to augment this learning process is to set up a “practice account,” by yourself or on one of the Internet brokerages, to chart your progress.
As you learn more and sharpen your financial acumen, you can decide on a reasonable amount of money (which you must be willing and able to lose in its entirety) to begin your day trading career. With consistent study, and perhaps a little professional assistance, you can become a successful day trader. However, it is not a matter of how you feel about it, or how much fun you’re having, or how exciting it is – it is a strictly rational assessment, measured by the money you’re making or losing.
Get a second, even third, opinion about your trial investment performance before getting in the real day trading game. If you’re not cut out for it, you will know soon enough, and if you never get the hang of it, it doesn’t mean you have to stop trading entirely. It just means that you should switch to Monopoly money and leave your real cash in other, more capable hands. Day trading isn’t for everybody. If it’s not for you, just stay away from it, as mistakes can be positively catastrophic.
Topics: Investing |
