NEW: Live classes are posted - Click here to see the calendar!

Advantages and Disadvantages of Being a Day Trader

April 8th, 2014

Hey I’m Sasha Evdakov and this video I want to share with you in the advantages and disadvantages behind being a day trader. If you want to trade stocks and looking to become a day trader, it’s important to understand what you’re getting yourself into and the advantages and the disadvantages. So in case you want to change and become a swing trader, then you’ll at least know the reason behind it.

First off, a day trader is someone that holds a stock or position less than a day which is 6 ½ hours, since the trading day last 6 ½ hours. So you can hold it for 20 minutes, you can hold it for an hour, you can hold it for five hours.

It's totally up to you, you can hold if for a minute. It doesn’t matter, but it’s less than a full day. That's what a day trader is and that’s what they do. Where as a swing trader holds a position for multiple days, two, three days, a week, a month. For longer term position.

Let’s talk about some of the advantages behind being a day trader. Advantage number one is that a day trader has no overnight risk on gaps or earnings, because you’re hundred percent cash by the end of the day. The second thing is is that your earnings compound faster, so if you’re making money every single day, you’re able to use the money that you made from the previous day to put into the next trading day.

It allows you to really accelerate your compounding earnings time and time again. This is one of the great attractions to people for day trading is because it’s like quick money. Now also behind day trading there’s more excitement. This is typically an emotional state and a lot of novice traders are really attracted to day trading because they get to see their account fluctuating up and down up and down. And you get really emotionally tied to it, it’s like wow my profit's going up. Or wow this really sucks, my profits going down. There is that rush of the emotions that’s happening but again like I said that's typically for novice or beginners and it's not a good way to be, if you’re looking to trade.

Now the next thing is also that there’s interest on overnight cash balance position for certain brokers. So if you’re able to be in cash by the end of the day, you'll earn some interest but certain places not all of them. I think most of them do do that nowadays. So those are some the advantages behind day trading now.

You may want to be a day trader and you may like those types of advantages and that might just fit your personality. But for other people it may not work, so there are disadvantages to being a day trader and some of them include things such as support and resistance areas just really suck, they’re not very well developed such as things that are looking on the daily chart or even the weekly chart. There is a lot less support and there’s a lot less resistance in the day trading areas or levels.

2014-04-08-adv-dis-day-trading.0005

Also a lot of the day trading action that happens is much work computer algorithmic. Or you can think of high frequency trading. So again you're kind of training against the machines and you have to be really careful when you're dong that because machines will always out win, because of trigger respond much faster.

They are able to get in and out of positions much quicker and they’re only looking to make a couple micro cents on their trade or positions, where for you just might not be worth it. But if they are dong it thousands of times for the machine it's worth it. For the company that owns that machine.

In addition to that, it can be more stressful since you have to be more alert and aware of your position each and every single day. This can really put a drain on you mentally. You'll also miss out on overnight gap ops, it the stock starts climbing higher and higher every single day if you’re day trader. Because the stock that continues to run higher will gap up time and time again, until it proves otherwise.

The market hours just don’t work for everyone when you’re day trading. Sometimes you can’t be watching the market for being so alert just because you might have a regular job and something that you might have to go in and do every single day. You'll have more commissions and expenses because you're getting in and out of position much more frequently. So their expenses tend to add up much more rapidly if you’re a day trader.

And finally there’s the pattern day trade role that you have to be careful of. If you're trading frequently and you have less than $25,000. These annoying regulations are in placed to help you out, but it could be annoying to the fact that might not be able to trade so often, since you have to get in and get out of the position within that single day.

2014-04-08-adv-dis-day-trading.0011

Those are some of the advantages and disadvantages behind being a day trader. Again I think it’s based on the personality type along with the market conditions if you're a day trader or if your swing trader. With a day trader you're in for the day and you are out. Maybe you want to close out your day and have the rest of your evening to just relax with your family and you don't want to be stressed or think about your stocks at all.

Whereas for swing trading position you might think about it in terms of a longer-term position and if it’s a longer-term position, if the stock dips you may think okay I’m not as stressed because I'm in it for the long haul. Whatever mindset works for you, use that and you it to your advantage.

That's kind of the advantages and disadvantages to being a day trader. Now which one is better? Which one makes more money? It is going to depend on the trader, the style and the system. But pretty much no one understand the advantages and disadvantages behind being in a day trader. So that way you can make a rational decision of what’s going to work for you and which style of trading you're attracted to.

Thanks for watching this video, I'm Sasha Evdakov and if you enjoyed this video and you want to take your trading to that next level and you want learn faster than you've ever learned before, check out some of my courses on my website at tradersfly.com.

If you would like to get recaps on exactly the stocks I'm watching today in this market conditions, you just go ahead and sign up to my newsletter list right here and when you're on it, you'll get notified when I release new market recaps. Thanks again and remember to do what you love, contribute to others and most importantly, go out and live life abundantly. Good, see you next time.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

Join over 31,258 regular people who are bettering themselves in the stock market.

Click Here to Sign Up

This is a community that is motivated to learn & improve their skills.
Join us and get free training lessons, freebies, and exclusive promotions.

want some helpful advice?

pay per minute coaching

I am scheduling helpful coaching sessions for people who are interested in real-world advice & guidance where you only pay per session. No long term commitment required.

Learn more
This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.