Day trading is buying and selling a financial instrument within the same day or even multiple times in a single day. Taking advantage of small price moves can be a lucrative game if played correctly. Despite the name, not all day traders are dummies. In fact, many day traders are pretty savvy. However, there are still a lot of people who lose money day trading. If you’re thinking about giving it a go, here’s what you need to know.
How Does Day Trading Work?
To make money day trading, you need to buy low and sell high—or sell high and buy low, in the case of short selling. Sounds simple enough, right? The hard part is knowing when to do it. Trying to time the market is a fool’s game—instead, you need to have a system that will help you make money in both rising and falling markets.
Creating a system isn’t easy, and it will take some time to perfect. However, once you have a system that works for you, stick with it! The worst thing you can do as a day trader is constantly change your strategies. Over time, you will develop an intuition for when to buy and sell. Still, in the beginning, it’s essential to have set rules in place, so you don’t make any costly errors.
What Kind of Instruments Can I Trade?
You can day trade stocks, bonds, currencies, commodities—pretty much anything that is traded on an exchange. Each instrument has its own quirks and nuances that you’ll need to learn to be successful. For example, stocks are typically traded on exchanges such as the New York Stock Exchange (NYSE) or Nasdaq. In contrast, currencies are traded on forex markets. It’s essential to do your research before you start trading to know what kind of market you’re getting into.
Is Day Trading Right for You?
Only you can answer this question. Day trading isn’t for everyone—it takes nerves of steel and split-second timing (not to mention deep pockets). However, it can be an exciting way to make money if you’re up for the challenge and willing to do the work.