Becoming a Day Trader

If you want to build wealth and save for retirement, then you need to be in the stock market. Investing is the best way to beat inflation. Without being able to generate interest, you’ll be doomed to watch your nest egg shed value over time. That’s why savvy folks who care about their future are sure to invest.

But not everyone invests in the same way. Some prefer a buy-and-hold strategy that allows them to pay less attention to their investments. Others pay pros to handle their investments for them. But some become very serious about investing, even to the point of focusing on it entirely as a career. This is something that you can do, too, as day trading is a very common option for those interested in stocks.

What is a day trader?

So what is a day trader, exactly? Generally speaking, a day trader is a person who trades stocks and other investments during the day, when the financial markets are open. They do so with their own money in the hopes of building wealth. A day trader uses a brokerage account to make their trades, and they can do so from home using a computer.

Brokers and regulators may use more specific definitions of day traders. A day trader may be someone who makes a certain number of trades over a given span, or it may simply be someone that the brokerage “reasonably considers” to be a day trader. The definition has regulatory implications for the brokers.

If the idea of becoming a day trader appeals to you, you should consider what it would take to become one.

Investing for beginners

You need to understand investing before you can be a day trader. This means knowing how stocks and bonds work. You should know how to invest in things like cryptocurrencies and commodities, as well.

And you should know how to create a balanced portfolio. When people invest their earnings, they try to balance risk and reward. In investing, risk tends to rise in proportion to reward, which means that having a balance of both is essential.

A day trader makes lots of trades and uses strategies to try to outwit the market, which means day trading tends to feature more aggressive tactics and higher risk than passive investing.

More aggressive investment strategies

As a day trader, you’ll be trying to stay one step ahead of the market. That means using the latest tactics and always knowing what financial news is relevant to you.

If you’re going to succeed as a day trader, you will certainly want to have subscriptions to major financial newspapers and websites. You’ll want to keep a close eye on stock tickers and market indicators. You’ll want to read trading blogs and visit forums to chat with other day traders.

Your ability to succeed as a day trader will depend, to a degree, on your tolerance for risk and your ability to make the most of risky market positions. It’s certainly not a career path for the faint of heart, but the rewards of successful day trading can be enormous.

Protecting yourself as a day trader

There will be days as a day trader during which you work all day and lose money. Other days, you’ll work hard and make tons. But from day to day, you’ll want to be smart about how you play the market.

Never put more than you can afford to lose into risky investments. Keep a nest egg of savings in a relatively safe spot that generates at least some interest. You should have some in a savings account, for instance, and some in low-risk bonds, stocks, mutual funds, and/or exchange-traded funds.

Remember to protect your other assets, too. Your home is an asset, but not a speculative one: protect it with insurance, remind experts in homeowners insurance in New Jersey, and don’t leverage its value to make risky bets as a day trader.

If you balance your day-trading risks with a careful management of your assets and a sensible strategy for your retirement funds and long-term savings, then you could have the best of both worlds—an inflation-proof nest-egg and a fast-growing chunk of cash in your day trading accounts. Be sure to do your research and invest wisely.