There are countless ways to make money through investments, and day trading is just one of them. Technology has led to greater access to investment solutions, market data, and lower rates. Naturally, this means more people are curious about getting involved in tracking small market moves to make a profit. Even though day trading is considered a pro-investor choice, anyone can make a living from it if they have the necessary starting capital, education, and experience. Below, we discuss four considerations when chasing a career in day trading.
Understanding Risk Tolerance
When you decide to become a day trader, you need to fully understand the risks involved. Every single trader will experience losses, but how many will depend on your strategy and experience as a day trader. With this in mind, before you begin trading, you need to decide how much capital you’re willing to risk, both in total and on a single position. As you’re dealing with short-term trades, you’re more likely to secure higher profits from higher investments, so getting this part right is critical.
Which Day Trading Strategy?
There are countless different trading strategies within the day trading umbrella, and you’ll have to pick one and stick to it. These strategies include:
- High-frequency trading. Using high-end computer setups, these traders make large trades at a fast rate, and an algorithm does most of the work.
- Scalping. This involves making several small trades in a single day and pooling a small profit pot. Bots can help achieve this strategy.
- News-based trading. Following the news is a great way to day trade, and news-based traders rely on these insights to make predictions.
- Pullback trading. When the market declines, pullback traders invest in the dip.
- Breakout trading. Stocks move within a set value range, and breakout investing involves buying or selling based on movement outside of this range.
- Range trading. Similar to breakout trading, but traders buy or sell when the value is nearing the value range limits.
When to Take Breaks
Becoming a full-time day trader means that there’s no one there to tell you to work, and no one to govern your time off. Therefore, it’s important to work out a strategy for getting away from the screens and resetting your brain. Fortunately, you can already find out when the stock markets will be opened and closed through 2026, which allows every trader to relax. Typically, these dates fall on holidays like Thanksgiving and Christmas.
Surviving Bear Markets
The stock market goes through two different periods – bear markets and bull markets. During a bull run, you’re more likely to make a profit and you’ll feel great about your choice to become a day trader. However, when a bear market hits, the market value declines because investor confidence is shaken, and this leads to significant losses.
When a bear market hits, you need to come to terms with the losses and find ways to mitigate the damage. For example, you can diversify and rebalance your portfolio, and you may consider exploring alternative trading strategies.
There is another management factor that zero amount of research can solve, and that’s your mental strength to leave your emotions at the door. When you suffer losses it can lead to emotion-driven actions, which lead to even more losses. Remember, even when the market is down, it’s bound to go back up eventually.
A career in day trading isn’t like other jobs because there’s no guarantee you’ll make a profit every day. Therefore, you need to make sure you’ve got enough capital to get started and put a strong strategy together.
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