Day trading is popular for a good reason. There are many advantages that day traders enjoy. However, it’s also very important to take note of the huge disadvantages you have to endure if you really want to pursue day trading.
Day Trading Advantages
Chance to Make Large Gains
Traders are often attracted to day trading because of the chance to make spectacular gains. If you can do it right, you can actually fetch some significant profits out of day trading.
However, before you achieve that, you will have to cultivate a lot of very important traits including decisiveness, discipline, and diligence. Without these qualities, it’s quite impossible to be a successful day trader.
You are Your Own Boss
As a day trader, you have the chance of working all by yourself. That sounds hard at first. But if you’re going to consider it, you won’t have to follow bossy rules of bossy bosses.
You can opt to have a very flexible work schedule and take a day off whenever you really need it. There’s no strict deadline; you can work at your pace. You don’t have to be in a corporate rat race.
There are lots of Action
For those who have gotten a taste of day trading and love it, it’s quite exhilarating to pit their wits against the whole market and other professionals.
There’s the adrenaline in the rapid-fire action in trading and that is something that many traders will not admit to. This is a big factor in their decision to make a living off of trading. It’s quite doubtful whether these kinds of people would be content spending their days in a boring 9-to-5 jobs.
You don’t need Expensive Education
In the world of finance and corporations, you should already have the right degree from the right school if you want to land even an interview.
On the other hand, day trading doesn’t require an expensive education from an Ivy League school. Now, you don’t really need those kinds of formal education to become a day trader, BUT you can take some courses in technical analysis and computerized trading may provide a huge edge.
Day Trading Disadvantages
Big Risks of Losses
The US Securities and Exchange Commission (SEC) tells us that day traders usually incur financial losses during their first months of trading, and many never even reach the profit-making status.
Although the SEC cautions that day traders should only risk the money that they can afford to lose, in reality many day traders incur huge losses on borrowed monies, either through margined trades or capital borrowed from family or other sources.
These losses may not only destruct their day trading career and may even bury them in huge debts.
Significant Startup and Maintenance Costs
As a day trader, you will have to compete with high-frequency traders, hedge funds, and other professionals in the market that can spend huge amounts of money to gain advantages.
In this environment, you have little choice but to spend a lot on your trading platform, computers, charting software, and other very expensive tools.
Maintenance costs include costs for getting live price quotes and commission expenses that can add up because of the volume of your trades.