Day trading can be a great way to make money online, but it only works to be successful if you know what you’re doing. It can be tricky to make money consistently unless you really apply yourself. Day trading doesn’t have to be stocks, either. You can day trade futures, forex, and even cryptocurrency. Day trading cryptocurrency is attractive to some people because it doesn’t have the same restrictions that futures and stocks do, but is it really an excellent way to earn money online? Well, that actually depends on a few key factors.
First, what is day trading? Day trading is the act of buying and selling the same stock all within a short period of time, such as the same day. Most day traders execute several of these traders per day, trading mere pennies to gain a profit each time it’s completed. In theory, it is an excellent way to earn money online if you are well-suited to it. Not many people are well-suited to day trading.
Day Trading Requires an Iron Stomach
Amateur day traders should start with a small account on Robinhood rather than opening a full-blown margin account to trade stocks and futures. An amateur’s odds of success at the beginning is like a high stakes gamble. Disciplined traders who understand their markets in and out are the most successful day traders. Newbies make the mistake of assuming they will be successful with every trade they make. Not every trade is successful, and you have to understand this going in. High-risk, high-reward scenarios are very common in day trading, but very rarely do they all play out like intended. Technical analysis can help day traders develop a strategy to increase the odds of winning trades, but market sentiment is just as much a factor.
Professional Day Traders
As a day trader, you are competing against everyone else on the market who is also day trading. That includes professionals who have better tools, better data, and more resources to price you out of the market. Many large hedge funds often do just this to smaller day traders in an attempt to squeeze them out of the market. Getting trained by a day trading professional can help increase your odds of making winning trades, but remember that every single day trader is competing with one another.
Practice Makes Perfect
If after reading all of this, you’re still interested in giving day trading a shot, you should start with practice trades. Platforms like Thinkorswim provide free dummy accounts with fake assets that allow traders to test their strategies without risking real money. You can trade as many stocks as the platform will support. Doing these practice trades will show you how viable your strategies are without risking any real money. Day trading success rates are estimated to be around 10%, so be aware of that before committing to trying it. The markets are a real-time thermometer that means if someone is making money, someone else is losing money.