Day Trading: Is It Worth It?

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Simpler Trading Team

Nov 19th 2021  .  6 min read

In this post:

  • What is the term for the buying and selling of securities within a few hours?
  • How do traders and investors aim to profit in the financial markets?

Day trading is the buying and selling of securities within the same day – usually within a few hours. It’s growing in popularity, but many wonder if it is truly worth the effort, commitment, and risk. 

People who love day trading love its fast pace. But that fast pace is not for everyone. And it’s not easy. You have to ask yourself if day trading is right for you. The answer depends on how much time you’re willing to invest in learning the craft. We firmly believe that anyone who is driven to learn has the potential to be successful. 

Are you evaluating day trading? Let’s talk more about it and look at the pros and cons of pursuing it.

Day Trading vs. Investing

Is there a difference between trading and investing? Yes, there is.

Traders and investors both aim to profit in the financial markets. However, they achieve their profits, and losses, very differently. Swing traders and day traders focus on the short-term. Day traders in particular use information, tools and strategies relevant for intraday trades. They try to predict a stock’s next move and profit from it. Investors, on the other hand, look at the long-term potential of a company before deciding to invest. So if a stock’s price is low and perhaps undervalued, investors seek to buy and hold it for months or even years awaiting upward movement.

Anyone with the right amount of drive and work ethic has the potential to be a successful day trader. This is why we are so excited to now offer you access to our free ebook Getting Started With Day Trading! We love welcoming new day traders to the field.

If you’re still trying to decide, let’s take a deeper dive into day trading.

The Pros & Cons of Day Trading

Let’s start with some of the benefits.

Pros

  • Be your own boss. Traders in general work from home and are their own bosses. Many people pursue trading as a career to have the freedom and entrepreneurial spirit it provides.  
  • Avoid overnight risk. In day trading, you complete your trades by the close of market – by definition, you don’t have overnight risk. With other methods of trading, you may hold a trade for several days or weeks. As a result, your position may plummet overnight and cost you money. 
  • Kick the conventional office and 9-5. You can day trade anywhere that has WiFi. You can travel frequently and not be limited by an office or a time clock. That said, the best day trades tend to occur in the opening and closing hours of the market where we see the greatest price volatility (and profit opportunity).
  • Come as you are. You don’t need a college degree or certification to be a day trader. Day traders come from many different backgrounds and often learn from mentor traders, courses, and numerous other resources. The path is up to you.

Like everything else, day trading can come with its own drawbacks. Let us go over a few.

Cons

  • High minimum balance. Day traders need a $25,000 minimum balance  in their trading accounts at the end of the trading day, according to US regulations. This is called the pattern day trader rule. However, our professional traders can teach you strategies for working around  these limitations. 
  • Potential for stress. The fast-paced nature of day trading can be stressful, and decisions to enter or exit a trade must be made quickly. This style is not for everyone.
  • Self-discipline required. It’s up to you to create a plan and structure your trading day. That means watching the market, keeping up with current events, and developing the right setups. You may find that a full-time commitment is necessary if you want day trading to be your career.
  • Risk of overtrading. 90% of trading is psychological. Traders who lose on a trade may choose to ”revenge trade” to earn money back. But this can lead to a downward spiral of even more capital loss. Revenge trading (or even impulsive trading) can wipe out an account in a short amount of time. 

Is Day Trading Profitable?

The answer to that question is kind of like asking, “Does the gym make you fit?” And of course, we know the answer depends on how hard you work. Day trading is not for the faint of heart, and it is not something you learn in a few weeks. You can get good at it, but you never stop learning. The market will always fluctuate and there will always be new trading strategies to develop. 

There are day traders that have made millions of dollars in one trade – including here at Simpler Trading – and there are traders who fail within the first year. For those who make a living out of day trading, it is extremely rewarding and liberating. Our day traders love pursuing a career they enjoy along with the lifestyle they want. They also love mentoring others to achieve their career and lifestyle dreams.

 

If you think day trading may be for you, we invite you to try our new Day Trading RoomA 7-day trial is only $7! Experience day trading first hand – a live trading room and live Q&A with veteran day trading mentors. You’ll also gain immediate access instructional videos, articles, and so much more. Our team is eager to share the best tools and strategies for market success. Join us!

 

To Join the simpler day trading room

FAQs  

Q: Can you day trade with less than $1000? 

A: No. Day traders need a $25,000 minimum balance in their trading accounts at the end of the trading day, according to US regulations. Traders will less than $25,000 in their account can only place 3 day trades in a rolling 5-day period. There is a way to get around the day trading rule by trading in a cash account instead of a margin account. Click here to learn a strategy around the PDT rule. 

Q: Is day trading really worth it?

A: Day trading is fast-paced and that fast pace is not for everyone. And it’s not easy. To answer if day trading is worth you you need to determine how much time you’re willing to invest in learning the craft.  With a finely tuned strategy, day traders can make consistent profits over time. 

Q: Is there a limit to day trading?

A: Traders with accounts less than $25,000 are only allowed to take 3 day trades within a rolling 5-day period. If you take four or more “day trades” within a rolling period of 5 business days, then you are considered a Pattern Day Trader, according to FINRA rules. If you don’t have $25,000 in your account and you take more than 3 day trades, your broker could lock your account to closing trades only.

Q: What is swing trading?

A: Swing trading is taking trades that you expect to close within a few days to weeks. The goal is to take profits from shorter time frame moves in a stock.