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Day Stock Trading - About Day Stock Trading - How day stock trading works, Benefits of day stock trading

Pros and Cons to Day Stock Trading

money traders stocks purchase

Day stock trading is the practice of buying and selling stocks quickly throughout the day, sometimes even selling one stock within minutes of purchasing it. Day traders make their money through leverage, which means they have the potential to make very quick profits, although they can lose their money just as quickly.

How day stock trading works

Day traders basically spend their entire day sitting in front of a computer screen. They spend every moment watching the markets because a split second can be the difference between a profit and a loss. People who practice day trading are constantly looking for market patterns, and they are ready to purchase or sell a stock at just a moment’s notice. The smallest change in the market can push them to buy or sell. It is not uncommon for people in day trading to purchase a stock one minute, watch the price increase a few cents the next, and then sell it just a couple of minutes after they purchased it. Most day traders do not own stocks overnight because there is huge potential for stock prices to drop overnight as the result of an unexpected event.

Day traders rely heavily on their instincts and usually buy stocks on margin. This means they borrow money to purchase their stocks, which is an extremely risky business.

Benefits of day stock trading

There really is only one obvious benefit of day trading, and that is the potential to make a lot of money in a very short amount of time. People who can easily recognize market trends and respond at the drop of a hat are ideal for day trading, but not everyone has the skills necessary to do it.

Disadvantages of day trading

The number one problem with day trading is the risk, and risk is precisely the reason day traders can make a lot of money in a short amount of time. However, they can lose that money just as quickly. Also, since day traders usually trade stocks using someone else’s money, they have the potential to lose everything and acquire a huge debt in the process.

Day trading can also be very stressful and draining. It takes a quick eye and a lot of skill because it can be very difficult to watch dozens of ticker quotes all at the same time.

Day stock trading pitfalls

There are also a few pitfalls that anyone considering a job in day trading should think about. First of all, do not believe everything you hear. Many of the so-called “hot tips” are just from companies wanting to benefit from the stock increase caused by day traders snapping up their stock, so every purchase should be considered carefully. Also many “experts” on day trading are not always objective, so think twice before taking advice about a trade.

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