| Updated: September 12, 2025How best to describe the essence of day trading
This lesson will cover the following
- Day trading is not equal to investing
- Day trading is not equal to gambling
- Day trading is associated with stress and does not guarantee success
There is plenty of speculation about day trading. Some say that day traders mostly lose their deposited money, while others think that day traders are, in most cases, successful. There is also another view, according to which day trading can lead to alcoholism and even insanity. Let us clarify what exactly day trading is and what it is not.
We cannot equate day trading to investing
Day trading is often inappropriately compared to investing. Day traders DO NOT hold their positions for more than a single trading day. Swing traders may hold theirs for a few days or a few weeks. Investors, on the other hand, rely on their holdings over a much longer term; some may hold positions for decades.
Day trading plays a crucial role in international financial markets. It helps ensure that price changes, which reflect supply and demand, are balanced. However, day trading does not provide sources of fresh capital for businesses and governments worldwide; therefore, it does not support economic growth in the long term.
- Trade Forex
- Trade Crypto
- Trade Stocks
- Regulation: NFA
- Leverage: Day Margin
- Min Deposit: $100
Day traders usually withdraw their trading funds regularly. Many attempt to construct a long-term portfolio intended to finance other business activities or simply their retirement. A day trader may also choose to appoint an expert to oversee his or her portfolio.
We cannot equate day trading to gambling
There is a widespread view that day trading is just a form of gambling, whereas in gambling the odds invariably favour the house. However, when it comes to day trading, we can say that the odds are evenly balanced in a number of markets. Markets where options and futures contracts are traded feature as many winners as losers. These markets are also preferred by individuals or institutions willing to hedge their risk exposure (we have discussed hedging in our Forex Trading guide).
In the stock market, especially over the long term, there is a chance of more winning than losing trades; thus, the odds favour traders.
Moreover, in every segment of the financial markets the successful trader is the one with solid knowledge, preparation, and discipline. In gambling, preparation and discipline tend to have little or no importance, because the odds favour casinos. There are cases when people addicted to gambling decide to take up day trading. However, this is rarely appropriate, because inveterate gamblers tend to make poor decisions regarding entries, limit settings, and exits at the end of the trading day, all of which can result in considerable losses.
We cannot say that day trading guarantees success
It is difficult, but not impossible, to day trade. Everyone can boost his or her chances of success in the markets by spending sufficient time educating themselves and practising. Then comes the choice of appropriate leverage and the initial margin to start trading. There have been a number of studies on whether day traders make money, and the majority concluded that success rates are low. Few who decide to engage in day trading actually succeed, partly because only a small proportion possess the knowledge and discipline to withstand the spectrum of risks that accompany trading.
Although many people lose a portion or even all of their deposited money in the markets, there are others who, being aware of the risks and rewards, achieve good results through proper management. They operate with risk capital, the amount of money they feel comfortable losing. They predominantly use limit or stop orders to minimise losses and always close their active positions at the end of the trading day.
Another aspect of day trading is the use of leverage, or in general the use of borrowed funds in order to improve performance. However, it also leads to a greater risk – a trader may lose more than he or she initially deposited. No broker wants such a scenario to develop; thus, most brokerage companies will likely close an account that is in danger of ruin. In this way the potential loss is limited. (For more on leverage visit our Forex Trading guide).
Day trading involves stress
Day trading is accompanied by high levels of stress. At times it saps one’s energy as he or she attempts to concentrate on what is currently unfolding in the markets, especially when real money is at risk. Sometimes the profit from a single trade or even a series of trades may be far less than one expects. This can cause a trader to be more tenacious and to enter a larger number of trades until the trading day is over. There are traders who simply cannot withstand the stress, and others who sink into frustration or boredom. And last but not least, there are people who cannot imagine doing anything else for a living, so they day trade, as this is what they really enjoy. Having the appropriate mindset and knowing how to manage emotions are what make the difference. (For more on trading psychology visit our Forex Trading guide).
However, there are other occupations that are also viewed as a difficult way to make a living by some, but as ‘dream professions’ by others. Every professional field has advantages and disadvantages, so day trading is no exception. Once a person understands the risks of each profession and keeps them in mind at all times, he or she will be able to cope more easily with any negative scenario that occurs as a result of his or her mistakes.