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5 Undeniable Advantages of Day Trading

what are the advanatages of day trading
Read on to discover the advantages of day trading as well as some of the disadvantages of working as a day trader that you should consider.

Day traders are different from the guys you find on Wall Street. Where financial professionals with university degrees work for trading companies, day traders are freelancers working from home. The main aim of day trading is to buy and sell stocks on the market throughout the day. 

A day trader’s goal is to make profits quickly by making less riskier investments and avoiding major fluctuations in the market. Read on to discover the advantages of day trading as well as some of the disadvantages of working as a day trader that you should consider.

Day trading can be a very lucrative income opportunity but it all begins with putting in the time to practice, study and learn the fundamentals of day trading principles and financial market movements. But with this knowledge and skill a day trader can become profitable and very successful in the long term. The key is putting in the time. There are no shortcuts!

That being said, let’s get into the advantages of day trading.

Advantages of Day Trading

Opportunity for Big Paydays

One of the major advantages of day trading and the reason why so many are attracted to this method of investing and earning income is that day trading can be very profitable.

You ahve probably heard the stories of many traders who got very rich through day trading. While it involves risks, day trading can provide the potential for high returns due to the frequent trading activity and leverage in some markets.

Successful day trading happens after months, maybe even years of consistent work on a trading portfolio and creating a strategy that will yield the most profits. The longer a person remains with continuous daily trading, the more chance they will have of making it a very lucrative career.

Live Anywhere in the World

Remote working is finally part of our reality and many people other than day traders are benefitting from this change in the working world. So long as you have a working computer, reliable internet services and time on your hands, you can live anywhere in the world.

With the freedom to live wherever they please, day traders can take advantage of countries that have low incomes tax rates and desirable living costs, such as Thailand, Spain, or Singapore. They can even use the financial experts at Property Guru to source a CIMB Home Loan if they want to own property in a place like Singapore. Property Guru has been running for 14 years and have expanded into 5 major property markets, meaning they have the relevant experience and expertise to guide those looking to invest.

advantages of day trading
With the freedom to live wherever they please, day traders can take advantage of countries that have low incomes tax rates and desirable living costs.

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Overnight Risks are Reduced with Day Trading

Day traders do not hold positions overnight, reducing exposure to overnight market volatility and unexpected news events. This is certainly one of the main advantages of day trading over long term investing. This occurs for bigger investment companies where post-market hours can cause a financial drop. 

Any unexpected news announcements or major changes in a massive company such as Microsoft can happen overnight. Those traders that have been working on deals for months stand to lose lots of money. 

For day traders, all transactions are finalized on the same day, meaning there is no risk when the market fluctuates overnight. Although this can mean an overall lower return-on-investment for day traders, the lower risk is safer for individuals working in the gig economy.

Day Traders Can Profit in Any Market Direction 

Day traders can profit from both rising (long) and falling (short) market conditions, leveraging strategies like short selling.

The ability to profit in any market direction one of the key advantages of day trading that sets it apart from traditional long-term investing strategies. Day traders have the flexibility to capitalize on market movements regardless of whether prices are rising or falling.

One of the primary ways day traders achieve this is through short selling. Unlike buying stocks with the expectation that their value will increase (known as going long), short selling involves selling borrowed assets with the intention of buying them back later at a lower price. This strategy allows day traders to profit from falling prices, essentially betting on a decline in the value of a particular asset.

And with the multitude of trading strategies, technical analysis and indicators available to traders that make it even easier to become profitable in many ways, it is still so vital to simplify your approach to trading as much as possible especially when starting out in order to develop into a consistent and profitable trader over time.


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You Can Start Day Trading with Relatively Low Amounts of Capital

Lower capital requirements in day trading make it a more accessible option for individuals looking to enter the financial markets. Unlike long-term investing, which often requires substantial capital to build a diversified portfolio, day trading allows traders to start with relatively smaller amounts of capital.

One of the reasons for lower capital requirements in day trading is the concept of leverage. Leverage allows traders to control a larger position in the market with a smaller amount of capital. While leverage can amplify profits, it also increases the potential for losses, making risk management crucial for day traders.

Another reason why lower capital is required to get started with day trading is becausue of the frequent trading nature of day trading. Since day traders aim to capitalize on short-term price movements, they can execute multiple trades throughout the day, leveraging small price fluctuations to generate profits. This active trading approach can help traders grow their capital over time without necessarily needing a large initial investment.

Recommended Read: Useful Degrees For Trading Stocks

Disadvantages of Day Trading

It’s a Stressful Job

Although there is downtime to day trading, learning the industry takes time. Day traders may not see any financial reward for the first few weeks until they learn the dynamics of the market.

The stressful part comes when you have to manage your emotions from financial losses, and learn from those errors. The only way is to practice, and that is how day traders become successful. They stick with it even when they have lost quite a bit of money.

Day trading is as equally profitable as it is risky. One simple bad trade either by reading the market wrong or missing a window of opportunity can cause a major financial loss.

advantage of day trading
Day trading can be a very stressful job especially when you have to manage your emotions from financial losses, and learn from those errors. But if you can overcome this there are major opportunities for great profits in day trading.

Discipline is Vital

Day trading requires a lot of focus and attention to detail. They have to watch market trends and buy and sell at the most profitable time. This means that day traders have to be disciplined with their money and watch the market all day, otherwise, they may miss an important shift.

Day trading requires daily trading with continuous monitoring of a trading plan and, because they trade in smaller amounts, they work on the volume of trades done in a single day.

Expenses May Increase

Experienced day traders often buy expensive computers and software that tell them when there are significant variations in the market and when profits are possible. Day traders are also required by the SEC to have at least $25 000 in their trading account at the end of each day. This is to protect the day traders, but many people don’t have that initial investment to make. 

Day traders also have to pay capital gains in the form of taxes and having capital losses is quite common. Day traders are also taxed often depending on the number of times commission is paid out, so the paperwork can be troublesome to keep up with.

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Success is Market Based

One of the biggest disadvantages to day trading is that your monthly income will be reliant on market trends that change constantly. At times, the market will be slow for a few consecutive months, and day traders stand to lose a large portion of their portfolio’s value.

If there are no significant fluctuations in the market for day traders to buy and sell from, they are very much stuck until the market picks up again. 

Day trading can be a rewarding and profitable profession if an individual remains dedicated to the job. This career takes time as there is a big learning curve in the beginning, and it’s extremely stressful. Managing one’s emotions and not letting them affect their ability to make rational financial decisions in the future is a big part of being a successful day trader.

Related Read: Day Trading Side Hustle – Doing It Successfully