How Risky is Day Trading?

If you have ever thought about day trading then you need to know that it can be a very risky endeavor to get involved with.  Day traders rapidly purchase and then sell stocks during the course of the day with the hope that these stocks will continue to go up in value or drop in value for the minutes (or in some cases seconds) that the traders own the stocks for. This would make it possible for them to lock in fast profits. Day traders very often buy on money that is borrowed with the goal in mind of reaping higher profits by way of leveraging.

If you have ever thought about day trading then you need to know that it can be a very risky endeavor to get involved with.  Day traders rapidly purchase and then sell stocks during the course of the day with the hope that these stocks will continue to go up in value or drop in value for the minutes (or in some cases seconds) that the traders own the stocks for. This would make it possible for them to lock in fast profits. Day traders very often buy on money that is borrowed with the goal in mind of reaping higher profits by way of leveraging. The down side to this is that they also run the risk of having to cope with higher losses.

It is important to point out that day trading is by no means illegal nor could it be described as being unethical. However it can be very risky. How risky depends upon the stakes and how many of your dollars you are willing to put at risk. The average individual investor does not have the money, the time or even the energy or temperament to earn money in this manner and to risk the huge losses that can accompany day trading.   

There are certain aspects of day trading that every investor should be aware of before they decide if it is for them. First of all day traders often suffer devastating financial losses during the first few months of trying it out. What this means is that they are forced to bow out before they can reach the point where they will see profit coming from their day trading activities.

Due to the potential for loss and the outcomes that day trading often brings with it those who still wish to try it out for themselves should never use money that they need to pay their mortgage or rent or their day-to-day living expenses. They should also not use money that has been set aside for retirement or take out a second mortgage. It is a gamble that you are not likely to win and it is not worth it, especially if you have a family that is depending upon you to make smart financial choices.

If you want to invest then you need to know that what day traders do cannot be described as honest to goodness investing. What they do instead is they watch for split second opportunities. They sit in front of computer screens and practically glue their eyes to them. They look for stock that is either climbing or falling in value. Their wish is to ride the momentum of any given stock and then get what they want from it before it switches to another course and goes up or down.

The day trader has no idea which direction the stock will go in. The hope is that it will move in one specific direction, be it up or down. Those who are bonafide day traders do not own any stocks overnight due to the risk that prices will alter in a radical nature from one day to the next which would lead to devastating losses for them. Day trading is very unstable and nerve wracking to partake of.

To be a day trader you must be committed to watching the market continuously throughout the run of the day. That means that you cannot allow your eyes to stray too far from the computer terminal or you could miss something. This is very difficult to do and demands a high level of focus and concentration. You must watch and process in your head dozens of ticker quotes as well as price fluctuations in order to spot the trends in the markets. The risk to you all depends upon how much money you are willing to put on the line.