Day Trading, Trade Wisely

Day trading can be very risky. The bottom line is that day traders should not risk the money that they cannot afford to lose. It is your money at stake, so you need to be sure that you feel comfortable with your knowledge of the market.

i. Possibility of Large Losses:
Depending on the decisions made during the day, a trader could earn lots of money. He can however, lose a lot of money too as the person has to close the position on the same day. Thus, any unexpected rapid movements can lead to significant amount of loss. Thus, one should abide by strict principles of trading and stick to strict stop losses to minimize the losses.

ii. Demands of Day Trading:
Day trading requires a lot of time and attention paid to the markets, and their trends and daily activities. A lot of focus has to be put into the market hours, which requires plenty of time to be spent in front of the computer screen. In addition to the time commitment, day trading requires a lot of study outside of your trading hours. An intensive amount of knowledge is needed in order to be successful at this profession.

iii. Overtrading:
One can over-trade either by executing many trades or by executing less trades of large quantities. Going beyond ones capacity results in overtrading. One should never over-trade in lieu of more profits because if things do not happen as expected, he can have huge losses.

iv. Out-of-Pocket Expenses:
Starting out as a day trader can cost a lot of money out of pocket. These expenses include: software (and hardware), commissions, manuals, and other resources. It is very important to develop a budget for these out-of-pocket expenses before entering the arena of day trading.