Day Trading Basics
June 18th, 2019
June 4th, 2019
December 18th, 2018
Listen to the Podcast
November 20th, 2018
Listen to the Podcast
November 2nd, 2017
Listen to the Podcast
Subscribe to the podcastiTunes Stitcher
Today what I'd like to do is share with you some insights of the pros and cons behind Day Trading.
Day trading is so popular. A lot of advertisers and people pushing to day trade, you can make a boatload of money change your life, fulfill your dreams - do it by day trading
I want to share with you some pros and cons when it comes to Day Trading and also gives you some words of wisdom behind Day Trading. Some things you need to be aware of when it comes to Day Trading because a lot of people out there don't really share the detailed insight behind Day Trading or maybe they don't fully understand. There's a lot of beginner traders that you'll run into or there's a lot of people that will pump their courses about Day Trading but don't understand what's going on underneath the surface.
- There's no overnight risk, meaning you're not holding a position overnight. If there's a word that breaks out somewhere in overseas you don't have those risks on hand
- Also, earnings are compounded much faster. You can make and take the money that you've made from the previous day. Take that and use it again for the next trading day or for the next time to potentially make more because you're using more capital.
- The other thing is there's more excitement, the emotional rush. That's another thing that many people get attracted to when it comes to day trading.
- Finally, you can make some interest from your cash. So, sitting it and letting it put on the broker platform. A lot of them will give you some interest to allow it to accumulate.
Now, all of these are really rookie related or beginner type of advantages. If you're looking for no overnight risk, you got to remember that you can still hedge a position overnight. You can modify positions earnings compounding faster, but there are other problems that go with it and an exciting and an emotional rush again. That's why a cocaine addict or a drug addict looking for its next high, and that's where the problems start lying when it comes to day trading.
- Not all conditions are great for day trading. Many people think they want to go into day trading, but the conditions on the market are not always set up to day trade or even not ideal. So, we'll talk about this here towards the end.
- Support and resistance levels are also not well defined. If you're looking at some necessary support and resistance levels throughout the day.
- There's usually computer algorithmic motions or support resistance levels. That's where you get into trading against these computers. That's where the problem lies.
- It's stressful due to the attention requirement. If you're day trading, it's putting on a significant position. If I'm making a day trade, I pretty much can't go to the bathroom. Your quality of life is very different. If you're a day trader, you're sitting in front of the computer screen, and you're honed in and focused on it. You can sit in front of a laptop while vacationing in Hawaii or some Island and make a bunch of money but think about all the other traders that have six to twelve screens in front of them, like me. When Those attention requirements are going to drain you as far as your quality of life.
- Miss out on overnight gap ups. So, for stock gaps up the next day, you're going to miss that because many stocks they gap up or even gap down on a day-to-day basis. You'll lose those continuous movements to the upside because a fact can only go up so fast in six-and-a-half hours. You want to be very careful as far as the gap downs. But also that means you don't get to make more money on the gap ups and stocks typically on a day to day basis.
- Market hours don't work for everybody. If you're making a day trade and you have a full-time job, it's tough because you know you're right there during the mid peak of the working hours. Another problem is if your swing trading, you don't have to be as focused on the attention, and you can put on some trades pre-market. After the market, you can put on a right toll cancel in order. You don't have to watch for that micro-movement. It's a whole different game.
- The Commission's add up extremely quickly. When you're day trading, you're putting on a lot more trade. I've talked to some students and coaching people that I've worked with. Some people put in ten thousand dollars just in commissions, and I've seen people do fifty thousand dollars worth of commissions and hundreds of thousand dollars in commissions. If you're doing scalping or high-frequency trading because you have to trade so much. By the way, if you're doing that much trading, be sure to call your broker and negotiate your rates.
- You have the pattern day trader rule which limits you if you have less than $25,000 in a margin account to day trade. It has to clear the program, the system. Similar to how a check has typically to clear when you deposit it into a bank.
What don't most people understand about day trading?
Here's some personal advice.
I see a lot of people going into wanting to day trade and a lot of this has to do with our emotional greed. We want to go after the money. We're chasing the money. That's the type of person that's usually attracted to day trading. It's the A-type personality. It's always on the go go-go-go-go method and mindset. That's not necessarily bad if you can match your character with your style of trading.
The problem with that is when you're looking at day trading, and there's a few issues. The first one is you don't make as much money because you're missing out on gap ups. Usually, you'll see day traders do depend on their account size. You'll see $500 a day or $1500 a day, and that sounds like a lot of money to most people just starting out in trading.
But the reality is, when you start seeing those numbers and figures, you get attracted to it. You get tempted to the cars, the vehicles. If you get attracted to these things - to the high life, to get wealthy quick lifestyle, more than likely it's going to bite you back because the problem with this is you're chasing the money. That's the first main issue.
The second thing is you don't make as much. There's only so much time in six-and-a-half trading hours. There's only so much time in a day.
In a real trade, a real trader that knows how to make money hold on to a position. They have a long and short position. They know how to hedge. What hedging means is they know how to modify their portfolio so that way if things do go against them, they have an extensive enough portfolio to where they can hedge. If things do go against them, they can counteract that movement.
A real investor - real trader, might have three to five positions trading a multi-million dollar account. You only need a few handfuls of positions. But then if things go against you, you can hedge that. You can adjust it with options you can hedge it with other vehicles three times ETFs and so on depending on the market conditions
The other problem here with day trading primarily in the last five to ten years or so is the market hasn't been set up for day trading. The previous five years, there are more algorithms high-frequency trading that have been happening you also have a low VIX.
People who are day trading, posting on social media quite frequently, are rooting against themselves. It's like a trader or like a regular human being rooting for I wish we had less air in this room. Makes no sense because how can you live without air or I wish I had less food in my refrigerator, how can you wish that?
That's what happens with a lot of traders. They want a crushed VIX. They want things to go to the moon. When in fact the reality is a professional trader want volatility. Recently, with the high algorithmic trading, the computer trading becomes more and more difficult to day trade because the movements have become smaller. Whereas, when you have volatility, it creates a higher risk. Higher risk creates more opportunity. That allows you to make more money.
Ultimately, that's the thing, when it comes to day trading where it's not for everybody. You can't leave your computer screens. Those dreams that are happening for you that you see on other people's platforms - YouTube channels, pictures of people make a boatload of money day trading while you're on vacation in the Bahamas, it's not feasible because your internet connection might not be quick enough. You probably don't have as many screens here as I do and the reality is you're going to miss out on trades. You're not as focused. You don't have the equipment at hand. Yes, you can put on some trades while you're on vacation, there's nothing wrong with that, but you probably want to do it differently because you have a lot of disadvantages while you're on vacation.
The same thing with day trading, there are certain market conditions where you can day trade, but in those market conditions, you usually want volatility. In fact, for most traders, you want volatility so you can trade more as option prices are higher. You have more volatility creates more opportunity for you as a trader.
Those are some things to watch out for if you're looking to get into the space of day trading. Don't just get sucked into it all the shiny objects that are happening.
You can do just fine day trading, but understand the conditions are not always there. Especially, if you have a market that keeps moving with a low VIX day trading opportunities are not going to be available as much since you have less movement on a day to day basis. With the lower VIX and with day trading, you want more movement. You want a higher VIX, and recently with all the computer trading, the environment creates less opportunity when it comes to day trading.
So for you as a beginner trader - if you're just starting out focus on a one to two to three month time span first, later on as opportunities present themselves and you become more active, then by all means you can go ahead and compress that get into more tighter swing trading or even day trading. But again, the conditions need to be correct. Just like when you're driving a car in the snow, there are different conditions than in the rain. In the snow, you're going to need snow tires. In the shower, you'll want to use your windshield wipers. There's a lot of different things that are going to happen. Different market conditions and you need to be aware of.
April 28th, 2016
Listen to the Podcast
Hey, this is Sasha Evdakov! Welcome to Episode Number 82 - Day Trading Stocks, When to trade, When to Sit, and some examples of day trading and some trading action.
I want to share this with you because the market is set up in a way to do some nice day trading. We've had earnings, volatility is coming in, and I want to share with you some thoughts about day trading.
April 21st, 2016
Listen to the Podcast
Welcome to another session of Let’s Talk Stocks! I’m Sasha Evdakov and this Episode Number 81. In this episode, I'm going to do something a little bit differently, actually in part due to because I have to go to a doctor's appointment.
I'm going to go ahead and record little bits and pieces throughout the day of the market to do my recap because I'm not sure how long I'll be gone.
April 29th, 2014
You can compare day traders and swing traders to the Ninja Turtles – always fighting the Foot Clan. They are always battling each other, but which one is better?
Let's break down the differences between day traders and swing traders, so you can decide which style of trading is better for you...
The holding time for a day trader is less than 6.5 hours, because there is less than 6.5 hours in a trading day. You can possibly hold stock for 7 hours if you trade premarket or aftermarket, but typically you'll hold less than 6.5 hours.
The holding time for a swing trader, on the other hand, is anywhere from 2 days to 2 months. It's typically longer than one day.
October 10th, 2013
Listen to the Podcast
Hey all you traders and investors! This is Sasha Evdakov and this is Tradersfly TV. Today we're going to discuss The Gap & Fade on Very Bullish Days, it’s October 10th 2013.
Let's get started now the market had a very serious update today and it was all due to the DEP ceiling and everything like that