Investing 101 – Should You Go into Day Trading?

Last time, the topic was about mutual funds. It is said in our previous article that mutual funds is one of the best investments anyone can make to prepare for their retirement. Of course, it doesn’t mean mutual funds are only the investments they can make: there is a wide range of opportunities available.

We’ve compared mutual funds with stock trading . Basically, the two are almost the same in the manner through which they help you earn money from your initial seed. The only difference between the two is that mutual funds reward you only shares of the fund’s proceeds and you don’t actually have any ownership over the stocks invested in by the fund manager.

On the other hand, directly trading in stock gives you ownership over such instruments. You can then let them go dormant and earn you some extra cash on their own, while you do your main job. That is definitely great; you get residual income without even having to lift a finger for it.

There’s another reason to invest in stock trading, though: this reason is the capability of being able to go into day trading .

What is Day Trading?

To summarize, day trading is simply short-term stock trading. We’ve discussed the long-term aspect of trading in the stock market already so you understand what it is about. It’s time to touch on the short-term method of trading (and earning) from the stock market.

Day trading is called as such because you are basically trading during the day. Trading hours in the market is only for 9 hours starting at 8 in the morning until 5 in the afternoon. However, thanks to the wonders of the Internet, you can now trade beyond the day. You can trade in many different markets around the world, as trading platforms are now capable of doing that for you.

However, the concept remains the same – you’re trading during the day hours of the market that you’re working in. Even if you’re halfway across the world in Thailand but you’re trading through the New York Stock Exchange, you’re still trading in New York City’s day hours.

How to Earn from Day Trading

You’re already familiar with how you earn from both mutual funds and stock trading. Your profits from your investment are dictated by the increase in the price of the actual stock in the market. If the price goes up, you earn. If the price goes down, you lose if it goes down below the initial price at which you bought the shares.

That works the same way in day trading; however, you’re basically betting on the hour-to-hour price changes in the stock. You’re not in it for the long term, but for the short-term.

Is Day Trading For You?

It really depends on how much time you have to monitor and manage your portfolio, and your risk appetite. Because of the length of time you’re working in, day trading can be quite risky but also very lucrative. It also requires a lot of time from you, and investment in the necessary tools in addition to the actual stock ownership.

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