Why Should a Trader Choose Day Trading ?

As you might have figured, trading, and particularly day trading, is not for everyone. Although day trading offers not only a fair amount of profit opportunities but also experience that can improve your personal qualities, it carries a high degree of risk, among other drawbacks, making it inappropriate for risk-averse people. In this chapter, we will discuss which people are generally considered suitable for day trading, and later 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 monetary 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.

Many novice traders quit within the first year. Some give in to the stress, others wipe out their accounts, or find the modest profit at the beginning unsatisfactory. A general rule of thumb is that you should not risk money you can’t afford to lose, because that would create additional pressure, enough to force you to make the wrong decision at a crucial moment. Because trading requires a lot of experience and patience before you can become consistently profitable and rely on it as your sole source of income, you will need to start with money set aside that you don’t need for everyday living.

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As time goes on, if this turns out to be the right profession for you, you will inevitably 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 life.

Think for yourself

Apart from suiting risk-tolerant people, day trading is also very suitable for independent individuals who want to be mobile and work from anywhere they’d like.

Being successful at day trading is not merely a job; it is akin to running a small business. You are in charge of everything – from acquiring equipment and setting up your accounts to calling all the shots during the trading sessions. All potential gains and losses depend solely on you, and that is how it should be. Good day traders are independent. Their trading decisions are not biased by others’ comments and advice, because they know that not every trader who shares their allegedly ‘profitable’ view of the market does so out of goodwill – some simply want to cause confusion and profit from it. Moreover, good day traders enjoy the challenges the markets present and seek to tackle them on their own.

Another positive aspect of day trading is mobility. As a day trader, all you need 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 you can’t trade from, even if you need to resort to a satellite Internet connection (although North Korea is probably not a suitable example, at least for now).

Tech geeks

Having mentioned modern technology, day trading is all about computers, the Internet, trading platforms and, in some cases, automated trading software. Day traders use different programmes to design and test their trading strategies, as well as to track their progress in spreadsheets. A day trader’s everyday life is spent in front of the monitor, so your guess that a certain affinity for modern technologies is required would be correct. Moreover, if something goes wrong with your hardware or software (if you can’t distinguish between the two, you definitely have a problem), you will need at least a basic level of knowledge to solve it – hiring a professional is not always possible. Besides, such services are usually expensive.

Economy, markets

Apart from an interest in money and technology, day trading is naturally one of the most common choices for people who love monitoring the financial markets. If the forces that drive the global economy – and local economies – intrigue 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, people’s interest in trading is fuelled by the prospect of earning money. However, doing something that brings you no satisfaction other than money – especially if you dislike it – will not last long. Becoming a successful day trader and excelling above others requires a genuine interest in the financial markets, because it involves extensive studying and practising, so you need to enjoy what you spend your time on.

Moreover, day trading is well suited to someone who understands human nature and is good at recognising and predicting crowd behaviour. The financial markets are a place where all kinds of buyers and sellers meet – from individual traders (freelancers) to institutional investors. All the market players’ views of the current and future state of the economy, as well as their intentions, are summarised in the asset’s price, presenting you with a very challenging, yet interesting, task: to assess 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 self-employed day traders; rather, they trade for larger organisations such as brokerage firms, hedge funds, etc. However, you may not want to share your profit with someone else or have your trading strategy dictated from above. If you want to be an independent trader and keep everything you earn, then day trading is your best option.