Why should a trader choose day trading ?
You will learn about the following concepts
- General thoughts on day trading
- Character types suitable for day trading
- Advantages of day trading
As you might have figured, trading, and particularly day trading, is not for everyone. Although day trading presents a fair amount of not only profit possibilities, but also experience that can improve your personal qualities, it does carry a high amount of risk, among other things, rendering it inappropriate for risk-averse people. In the current chapter we will discuss which people are generally found suitable for day trading and later on in our guide we will outline the types of personalities who, at least in our view, should avoid this type of livelihood.
First of all, in order to become a profitable trader, one should have a certain risk tolerance. Although this quality can be improved over time as experience is gained, it is not something you can just acquire. Thus, if you are the type of person who handles money losses relatively calmly and you are willing to risk some of it in order to hopefully become wealthier, then you are definitely suitable for day trading.
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A large part of novice traders quit in the first year. Some give up to the stress, others wipe their accounts or find the small profit in the beginning unsatisfying. A general rule of thumb is that you should not risk money which you cant afford to lose because that would result in additional pressure, enough to force you make the wrong decision in a crucial moment. Because trading requires a lot of experience and patience before you can become consistently profitable and thus rely on it as a single source of income, you will need to start off with set-aside money that you dont need to live on.
As time goes on, if this comes to be the right profession for you, inevitably you will start earning enough money to quit your previous job. However, if things go in the opposite direction, you should always have some so-called “walk-away” money that will allow you to quit day trading and move on with your live.
Think for yourself
Apart from being appropriate for risk-prone people, day trading is also very suitable for independent people, and such who would want to be mobile and work from anywhere theyd like.
Being successful at day trading does not only have the status of a profession, it is like owning a small business. You are in charge of everything – from the acquiring of equipment and setting up your accounts to calling all the shots during the trading sessions. All the possible gains and losses depend solely on you, and this is how it should be. Good day traders are independent. Their trading decisions are unbiased by others comments and advice, because they know that not every trader out there who is sharing his allegedly “profitable” view of the market is doing that out of good will – some simply want to cause confusion and benefit from that. Moreover, good day traders like the challenges presented by the markets present and seek to solve them by themselves.
Another positive side of day trading you should consider is the mobility. As a day trader all you need to have is a good computer and a reliable Internet service provider. The reach of modern technology has expanded so far that there is hardly a country in the world where you cant trade from, even if you need to resort to satellite Internet connection (although North Korea does not seem like a very suitable example, at least for now).
Having mentioned modern technology, day trading is all about computers, Internet, trading platforms and in some cases – automated trading software. Day traders use different programs to determine and test their trading strategies, as well as track their progress in spreadsheets. A day traders everyday life is spent in front of the monitor and therefore your guess that a certain appeal toward modern technologies is needed would be right. Moreover, if something goes wrong with your hardware or software (if you cant distinguish those two you definitely have a problem), you will need at least a basic level of knowledge to solve your problem – hiring a professional to fix it for you is not always possible. Besides, such services are usually expensive.
Apart from having a rather huge interest in money and technology, day trading is logically one of the most common choices for people who love monitoring the financial markets. If what drives the global economy, as well as local ones, intrigues you and you have been closely observing the securities business for years, regardless of your day job, then day trading has a very good chance of becoming your new profession.
Of course, peoples interest in trading is fueled by the prospects of earning money. However, working something that brings you no other satisfaction than money, and especially if you dislike it, will not last for long. Becoming a successful day trader and excelling above others requires genuine interest in the financial markets, because it involves extensive studying and practicing, thus you need to like what you are spending your time on.
Not only that, but day trading is very suitable for someone who understands the human nature and is good at determining and predicting crowd behavior. The financial markets are a place where all kinds of buyers and sellers meet – from individual traders (freelancers) to institutional investors. All of the market players vision of the current and the future state of the economy, as well as their intentions, are summarized in the assets price, thus presenting you with a very challenging but also interesting task to asses all the different points of view and predict where that price will go next.
Some people who are drawn by the same interests and goals prefer not to be a self-employed day trader, rather trade for larger organizations such as brokerage firms, hedge funds etc. However, you may not want to share your profit with someone else or get your trading strategy dictated from above. If you want to be an independent trader and earn as much as you have achieved, then day trading is your best option.