Dispelling the Myths of Day-Trading
May 18th, 2012
As a trader that utilizes both short-term and day-trading strategies, I have been given a unique insight into the true benefits and disadvantages of both. As a educator of trading, I have also had the chance to hear many oft quoted expressions in regard to trading that are firmly believed, but simply do not hold up under scrutiny. Many of these town on the branch of day-trading. If you are curious in day-trading, then it behooves you to know what is true and what is not.
Myth 1 – Day-trading is risky, much more than short-term trading or investing.
Stock Market Quotes
Without doubt, the risk is greater for short-term trading. In any particular trade you are risking far less in a day-trade than in ether a short-term trade or long-term investment. What gives the appearance of greater risk is that you are typically taking more trades. Even on my worse day I have never lost as much as I have short-term trading. Yes, that is right. Even on my worse day combining all of those day trades I still have not matched what I have lost with some of my short-term trades even though they are just one particular trade. My own caress demonstrates that short-term trading and investing often proves riskier than day-trading. Surprised? You shouldn’t be, it is a matter of tasteless sense. How much do you risk on a day trade as opposed to a short term trade? If a short-term trade has so much of a greater inherent loss than any day trade what is going to be the simply outcome when trades go bad?
Myth 2 – Day-trading is gambling
Any trading is gambling if you trade without a plan or allow emotion to control your decisions. The key divergence is either you are putting the odds in your favor or not. If you are doing so then the trading, either you are talking about short-term, investing, or day-trading, becomes a business. If you can’t put the odds in your favor then all of them can be determined gambling. None have an benefit over another.
Myth 3 – Day-trading ties you to a computer all day
I have to laugh at this myth. My typical day is an hour and a half in the morning and two hours in the afternoon, with a two hour lunch break. Even when I am trading I don’t watch the store all the time because I am waiting for set ups to develop, so often I am playing a game on the computer or watching television while waiting. There are limited times when a store trends while the day, the most profitable times to trade. Most of the time it just consolidates. while these down times when the store is in consolidation there is no need to watch the markets like a hawk. There are very simple ways to alert you when it is time to put in order for a trade. Frequent breaks should be the norm, not the rarity. I don’t know of any other career that can pay you as much and yet give you so much free time.
Myth 4 – Day-trading is too stressful
Any trading is stressful if you are losing money, just as any trading is easy if you are development lots of profit. It isn’t the type of trading, but how well you adapt to it and either you are victorious or not. The stress of day-trading typically results from two things; poor trading and the inability to adjust emotionally to the fast pace. Day-trading requires much faster responses because they are made in real time. There isn’t much time to analyze and then reanalyze a situation before development a decision like a someone might do with short-term trades. So a trader needs to know their trading formula well, to the point that it is approximately second nature and they also need to keep their emotions in check. While it may be difficult to initially do this, many of us have already mastered other endeavors that want real time valuable decisions, such as driving an automobile. To get such ability is a simply matter of practice, custom and then more practice.
Myth 5 – The Biggest money is made on longer term moves chronic weeks or longer
A day-trader can double, triple, quadruple, and more beyond that of a someone trading the longer term trend. This is because a store will simply weave up and down as it develops, allowing for repeated profits covering the very same range. Having done both I know firsthand that a victorious day-trader can blow away any short-term or long term investor when it comes to profits. The only time a short-term trader will conduct to make more profit is when a store gaps overnight, but even with this figured in a victorious day-trader will commonly be rewarded much more handsomely over the long term.
Myth 6 – When you day trade you miss out on the big profits generated by overnight gaps
You also miss out on the overnight losses as well. Gaps indicate high volatility and in many cases the store will swing violently both ways. Day-trading protects you from that overnight risk. But here is the surprising twist about overnight gaps; it is not uncommon for a store to close an overnight gap while the day, giving a day trader a chance to capture the profit generated by overnight trading anyway. There are of procedure some markets that are not well fine for day-trading, while others are. So store option can make a valuable divergence when it comes to this issue. Trading a store that is inclined to overlap itself while the day will more than make up for any overnight gaps that occur.
While there are many more myths that could be dispelled here, it is also prominent to be balanced and consider the other side of the coin; the negative aspect of day-trading. While day-trading is a great way to make a living when you are consistently profitable, it can also be the worse career option if you consistently lose. This is true of any type of trading, but in day-trading an private typically has given up a regular job and of course, a regular income. Also, more is demanded emotionally. This latter factor is one that most assume is personally of no concern and yet often proves to be the one issue preventing their success. There is an inherent infirmity of emotion that every person has and yet most refuse to believe they personally could have an issue with it. So they often fail to ever address it correctly and it continues to plague them.
However, if a trader does learn to trade profitably on a consistent basis and they also learn to control their emotions then day-trading is no ifs ands or buts one of the greatest means for development a living that anyone can pursue. The leisure to work when you want to, the whole of money that can be made, and the lifestyle it provides is truly amazing. It no ifs ands or buts is all that is promised; the dream job. Although it takes a lot of work to reach that goal, do not be swayed by the myths about day-trading. This one is for real.
Dispelling the Myths of Day-Trading
