Day trading, at its most simple, is just buying and selling (or selling and buying) stocks within the same day. And according to some internet personalities (and tacky signs around your town), day trading is an easy way to make money on the stock market.
Unfortunately, it’s not actually that easy. In fact, you can make money from day trading―but the reality is that you’re far more likely to lose money.
In this guide, we’ll explain how day trading works, unpack the risks, and point you to some alternative stock market strategies.
As we said up top, day trading―also called intraday trading, if you want to feel fancy―is a simple concept. All you’re doing is buying securities (like stocks) and then selling them within a brief period of time (usually the same trading day).
In theory, this practice allows you to take advantage of small (and occasionally big) fluctuations in the stock market. You’re not expecting any single day trade to make you rich, but you’re hoping to make enough small gains on enough trades that you’re turning a tidy profit.
Note that you don’t have to limit yourself to stock trading. You can trade stocks, yes, but you can also trade options, futures, and other types of securities. You can even do Forex trading, or trading currencies on the foreign exchange market.
Likewise, you can trade on various stock exchanges and markets, such as the New York Stock Exchange (NYSE), Nasdaq, or the forex market.
As with any kind of investing, you can use several different strategies for your trading.
For example, you could just look for fluctuations in prices. You could watch the news and anticipate price movement and market conditions based on current events. You could try some kind of technical analysis to figure out an ideal trading plan.
Whatever trading system you land on, you’ll still be trying to get many small wins rather than one big windfall.
But should you get started with day trading at all?