Trading is one of the oldest activities in which humans have engaged in for profit. The free and fair exchange of assets is a time-honored tradition, and it remains hugely popular in the 21st century. Whether it be stock trading, foreign exchange trading, options trading, or even most recently, crypto trading, in 2022 anyone is capable of connecting to the internet, finding a trading website, and delving deep into the market that attracts them.
Trading today can be separated in two broad ways. Long-term trading and short-term trading. Long-term refers to holding on to your assets for a long time before exchanging them, whereas short-term trading means traders are likely to sell off their assets in a matter of minutes, hours or days. When we talk about short-term trading, one of the most popular forms of it is day trading. In this article, we are going to explain thoroughly what day-trading is, and the pros and cons it comes with.
What is Day Trading?
As the name would suggest, day trading is the act of purchasing assets, and then selling them off the same day. The practice is one of the most difficult forms of trading to master, and often times, even seasoned traders tend to avoid it. However, the most experienced of traders, who have succeeded in day trading, have certainly made a decent profit.
Despite the difficulty it takes to master day trading, quite a lot of people are still up for the challenge. It is for this reason that many online trading platforms, such as https://tradingplatforms.com/uk/day-trading/, exist. These platforms are very helpful, as they are convenient, easily-accessible, and offer tips and tricks that will help new traders get a hold of the situation.
The Pros of Day Trading
Now that we know what day trading is, let us look at the pros that come with the practice. The first and most important benefit of the practice, is that you will be your own boss. If you’ve chosen to make day-trading your full-time job, you will be faced with a lot of hard work. However, the reward you reap is that you will be the master of your own faith. Nobody will tell you what to do, and there will be no pressure to do things in one way.
Another benefit, is that there is no risk of overnight change. Quite a lot of traders have experienced the following. An asset is on the rise for most of the day, and the trader calmly goes to bed. Only to wake up to the horrifying realization that their stocks have plummeted overnight. This can never happen with day trading, because the assets are traded during the day.
Lastly, one of the biggest benefits, related to the overnight risks, is that you will not be subject to overnight fees and charges, because you will not be holding on to your positions overnight.
The Cons of Day Trading
Of course, as with any form of trade, there are some drawbacks to day trading. The first and biggest one, is that the process is difficult to get into. The reason for this is that it requires a lot of research for one, and that the first few days or month will be marked by a loss in revenue.
In order to be successful at day trading, you must first do days-worth of research and familiarize yourself with the patterns of the market. Many have characterized the process as a “get-rich-fast’ activity. This is absolutely not the case. Day trading requires a ton of hard work, and often results in a loss of revenue in the first few weeks of practice.
Which brings us to the second drawback, you will almost certainly lose more money than you make at first. Many have tried out day trading, only to give up on it due to the amount of cash they’ve lot in the first few weeks of trading. Sometimes, the amount of cash you will make, is not worth the amount of cash you are losing presently, so before you start trading, make sure that you are aware of the risks that come with it.
Is Day Trading Legal?
There is a lot of people who, for whatever reason, believe that day trading is illegal. For those interested to try the practice, we are happy to report that that is not the case. However, there are some rules and regulations placed on the market. The most notable is the pattern day trader rule, which puts a limit on the amount of day trades one can place in a 5-day week. In accordance with the PDT rule, a trader can’t make four or more bets in one work week. If an attempt is made to do so, the account will be flagged down, and maybe even suspended. So, when you are day trading remember that you can only make 3 trades a week.
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