Reasons why day trading is right - or wrong - for you.
by Shay Horowitz of ShogunTrading.com
Looking at it from the outside-in, day trading can seem
intimidating. Day trading has paved the road to riches
for many but you wouldn't know where to start. Even if
you did, day trading is for someone else - not for you.
Day trading is intimidating, and rightly so, but you probably
have many of the misconceptions that those new to trading
typically have. In fact, many of these misconceptions
might be keeping you from day trading for the wrong reasons.
In any case, those who decide to day trade or swing trade
and those who decide not to inevitably asked themselves
the same question: "Why Trade?"
Day trading is a unique undertaking that challenges even
the smartest of people. The risk is very high, but the
rewards are great, and the rush from a successful trade
is even greater. The risk, however, can sometimes seem
too high, uncontrollable, and not worth the effort for
many day traders. Day trading and swing trading aren't
for everyone - it's up to each individual day-trader-to-be
to decide whether or not he or she has what it takes to
be a successful day trader or swing trader.
When considering entering into day trading as a hobby
or as a full time occupation, there are many considerations
to take into account. By weighing these considerations
before entering the market, you can determine whether
or not day trading will be your road to riches - or to
Imagine a business that has almost no overhead, you set
your own hours, all your assets are liquid at all times,
you are not tied to one location, you can never be fired
or laid off, you can take a vacation when ever you want,
you can work out of your home and if you do it well, you
can also make as much money as you want.
Done imagining? Day trading can be this perfect business.
The amount of capital that you start with grows with you
as you grow. As your capital grows, so do your earnings
and so on. It is quite possible for a day trader to, on
a daily basis, make profits equalling 5% or higher.
This means, if you start day trading with $25,000, then
that day you'll earn 5% of that in profit, or $1250. The
next day, you will have $26,250. Earning 5% on this equals
$1312 profit for the second day. Formulaicly, this would
suggest that you would earn at the end of "d"
days $25000(1.05)d-1. Theoretically, if you were to earn
an average of 5% profit a day, you can turn $25000 into
$108,000 in only 31 days.
To earn rewards like that in day trading or swing trading,
however, requires a great commitment and stamina, a great
mind for how the market works, or at least access to a
great wealth of knowledge.
is a Business
Would-be-traders see day trading as a source of income
much like gambling. You chance your money on a venture
that might or might not be, and if you gambled correctly
you reap the rewards. What day trading actually is - and
what most new investors fail to understand - is that day
trading is actually a business that requires a great deal
of research, time, and ethic to execute successfully.
Your trading business has employees (i.e., yourself),
outsources services (e.g., a broker), and competitors
(e.g. other traders, the market itself). Every business,
like yours, exists in a market, and trading is no different.
Day trading however, is a much faster-paced business than
any other in that market fluctuations occur at every instant
and each flux instantly affects your earnings.
Just like any other business the purpose of trading is
to make money, and like any other business trading aims
to not just make money, but also make it on a consistent
basis. Longevity in any business such as trading requires
hard work, stamina, growth, consistency, bookkeeping skills
and the willingness to risk a lot for much larger returns.
The rewards wouldn't be so great if the risk weren't likewise.
Working capital, the amount of money available for use,
is a business's livelihood. Your capital is what you depend
on for the sustenance and growth of your trading business.
Capital preservation is always more important to growth
than capital appreciation, and that is why, as a potential
businessman, you must be prepared to inject your profits
back into your business. There's a chance that you'll
lose the money you just earned, but your business as a
trader stands to give you so much more if you risk it
Everyone Can be a Trader
Traders are analytical, problem solvers, entrepreneurial
people who are not afraid to take a risk. Traders have
to be well capitalized with the patience and dedication
it takes to learn how to trade. Beyond all things, a trader
must have the stamina to recover from losses, and to wisely
use profits to achieve greater day trading rewards.
Being a successful trader requires traits that most do
not. If you do not have these traits, perhaps day trading
is not right for you. Traders have to be able to think
outside conventional frameworks, think quickly and wisely,
without involving emotions or prejudice and act immediately.
While this may not sound like something difficult to do,
when you consider that waiting a minute too long, making
a wrong decision, or ignoring a trade for any reason can
result in a loss of hundreds to thousands of dollars you
realize that anything less than perfect judgement can
Day trading can be a difficult field to enter, but it's
just as difficult once you've penetrated to continue trading
successfully. In fact, many existing traders find themselves
overwhelmed by the inability to conduct their trades as
successfully as their potential permits. A survey of 300
investors conducted in July of 2002 by InsightExpress
shows that 33% of investors lack time to properly research
all their trades and 28% admitted that analyzing the markets
was too complex for them.
In spite of the overhwelming barriers and demands to
becoming a successful trader, I would like to encourage
you to find out more about trading. Trading can be one
of the most exciting and rewarding endeavors that you
ever undertake. Even if you're not making thousands a
day, trading with even moderate success will invigorate
you as well as teach you the important concepts of money
management and thinking on your feet. There are many resources
that can help you get started, and if you're not convinced
that you can be a day trader, I suggest researching the
subject some more. All you need to get started is knowledge
and capital. Whether you are successful and continue to
trade is up to you.
Shay Horowitz has been a successful
day trader advisor for over 10 years. Currently he works
as an advisor to other traders and has helped hundreds of
clients bring in an average 15% profit per trade. Ask Shay
today to find out how he can help you become a successful