4 Things You Need to Know Before You Start Day Trading
Being able to earn money making quick moves on the stock market with a small amount of starting capital may seem like a dream to many. And in reality, this is often what it remains, a dream.
Day trading is much more complex than that, and only a few end up actually being successful. This is because many come with misconceptions based on myths and half-truths about day trading and end up falling flat on their face when they see the reality of it. This is why you should have a clear understanding of what day trading is and isn’t before you get started. Let’s take a look at a few things you’ll need to know before you start day trading.
Getting Rich with Day Trading is Tough, But Not Impossible
On one hand, you have people who think just trading the news or checking financial statements will make them successful day traders, while on the other, you have people who think that it’s all a scam and nobody actually makes money through day trading. You may wonder if it’s possible to make a living as a day trader. The answer is yes, but it depends on your approach, mindset, knowledge, and skill.
If you learn all the fundamentals, such as how to read charts, value companies, and stocks, and use the proper tools the right way with a solid strategy and a lot of discipline, then making a sustainable income with day trading is possible. But, if you’re trying to find shortcuts or some magical system you can just replicate at will, then you’re in for some disappointment.
You Need to Treat it as a Real Job
One of the appeals of being a day trader is being able to work from home or anywhere, and not having to answer to any boss. While this is all true, you also should never forget that it’s a real job. You need to have a strict plan and stick with it, and be able to maintain a schedule. If you can’t have some sort of structure, chances are your results will be as inconsistent as your routine.
Education is Everything
People come to day trading from a wide variety of different backgrounds, and with varying education. Some come with nothing but heart. In all cases, you will need to humble yourself and know that you have to learn a whole new skill if you aren’t familiar with finance. You will need to put more focus on studying the craft than making trades at first, so that’s something you’ll need to be well prepared for.
Know the Difference Between Investing and Trading
A lot of people will think that trading and investing are the same thing, but they’re very different. Investing is usually done over time, and trading is all about opening and closing positions. With trading, you get faster results, but the gains are lower. The same can be said about losses in many cases as well.
Investing often requires more understanding of finance, balancing spreadsheets, long term valuation, and history of companies. Trading is something that is much more easily attainable to beginners, and someone with an understanding of basic tools will sometimes be able to make some money. However, when done right, investing can get you great returns, so ideally, you should try both styles and see which one works for you.
These are only some of the things that you’ll need to know before you embark on your path as a day trader. Make sure to focus on your education first and foremost and take baby steps before you get into your stride.