Many traders are still hesitating between day trading and long-term investments. This method of day-to-day trading has various advantages, but also has some disadvantages. To help you make the right decision, here are the pros and cons of these quick trips
The benefits include
The fast speculations of day-traders can be interesting for several reasons:
- Opportunities are to be seized on a daily basis, which gives the trader the opportunity to pocket profits every day. While for long-term speculation, it can take a long time to get a good investment opportunity;
- As trading time is very short, about 10 minutes a day, there is less risk of unexpected changes in the market;
- During the night, it is possible to take little or no margin, given the almost non-existent risks;
- Several trading techniques can be applied, including swing trading and high probability input systems which are very efficient;
- With a good trading strategy, it is perfectly possible not to make any losses for weeks;
- Withdrawals of winnings are quick;
- Day trading is very stimulating from a psychological point of view.
Very short-term investments, however, have some negative points not to be overlooked:
- The amounts of winnings are often limited. To make a tangible profit, it is generally necessary to ensure a reliability of more than 50%;
- Transaction costs are much higher when bids are low. They can consume a large part of the profits and, sometimes, they constitute up to 20% of the initial capital;
- Market shifts can lead to significant losses;
- The day trader can lose much more than he earns, especially with many high probability inputs;
- It is necessary to follow the courses in real time, every day. The research costs are, therefore, significant and, as an added bonus, it is necessary to be more available to carry out the management of trades;
- The psychological stimulation of day-trading is only a decoy. It does not make money, but on the contrary, pressures can generate unnecessary precipitation for the trader.
In any case, it should be noted that the choice to become a day trader or investor in the long term depends on other factors. In order to put the chances on your side, it is essential to establish strategies adapted to your objectives.