Can You Make Money Day Trading?
When people hear that a person makes money from the stock market, they usually envision vast wealth and a glamourous lifestyle. Unfortunately, the thousands of people who make their income from the stock market find that the type of lifestyle that is lived can vary from one trade to the next. Day trading is risky and the U.S. Securities and Exchange Commission offers many warnings and tips for individuals who are considering becoming professional day traders.
Other People Are Reading
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Misconceptions
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There is a misconception that day trading is an easy way to make money, but according to the book "A Beginners Guide to Day Trading," nearly 80 percent of people who begin to trade stocks professionally eventually quit. The author of the book, Toni Turner, further states that the day trading profession is better suited for people who don't mind jumping blindfolded into the dark unknown. Because day trading is so uncertain and unpredictable, an individual should never trade with money that they cannot afford to lose.
Potential
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Successful day traders can earn hundreds or thousands of dollars each week. These traders usually have many years of investment experience and a developed expertise in the stock market. Most day traders are also former Wall Street employees who have a firm grasp of the volatility and risk involved. People who start day trading without professional investment experience are simply gambling.
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Considerations
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Successful day traders have learned how to avoid many of the pitfalls involved in day trading. Some of the most common mistakes are trading that is based on emotion rather than fact; not using enough leverage; investing too much money in penny stocks; and not conducting the proper research before purchasing a stock.
Expert Insight
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Although it is possible to make boatloads of money day trading, there are also people who have lost their life's savings in the stock market. According to Matt Krantz, a financial reporter from USA Today, day trading is an excellent way to grow poor. He explained to his readers that day traders must time the market down to the second and most people are unable to accomplish this feat.
Legal Requirements
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The Financial Industry Regulatory Authority and the New York Stock Exchange legally require that individuals who are deemed "pattern day traders" have at least $25,000 in their accounts. Also, they can only trade on margin accounts. A pattern day trader is anyone who makes four or more day trades within a five-day period. Those who want to day trade legally must first ensure they have a minimum of $25,000 to start.
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