December 20, 2017

Day trading: Don’t try this at home without help

Don’t Try this at Home Without Help: Day Trading

Day trading has been around for decades, but the heyday of the day trader was the dot-com bubble of the late 1990’s to early 2000’s.  During this time, day trading became widely accessible to the masses and there was an overall sense of “irrational exuberance” in the markets.  Doctors and lawyers started quitting their jobs, growing their beards, and staying home to day trade the hottest new tech stocks. This often did not end well. Neither did a lot of marriages.

While this early day trading phenomenon did mint a few new gleeful millionaires, most mom and pop investors ended up losing a fortune and setting their retirement funds back by decades.

What can you do?  It seemed like a good idea at the time.

Would you like to play a game?

Day trading today is different. Essentially, it is a $5 to $10 trillion dollar a day financial video game.  That’s the approximate dollar value of all the financial instruments that change hands on a daily basis around the world.  Much of that trading volume is just traders and computers attempting to steal a few cents from each other.  An HFT (high frequency trader), a pre-programmed computer algorithm, may buy and sell the same security hundreds of times a day in an attempt to make a fraction of a cent on each trade.


Day traders begin and end each day holding 0 positions.  This means that all the trades they make during the day are closed out by the end of the same day.  If they buy a stock in the morning, they have to sell it by the close of the market that day. 

The benefit of this type of activity is that banks will allow them to leverage up their positions to much higher levels.  Usually at least 4:1 or higher for stocks and more like 100:1 for currency.  So, a day trader can put up $25K in capital and get $100K or more in intra-day stock buying power.

Sound great?  Ready to reap your rewards?  Careful—it’s a double-edged sword that allows the trader to do a lot with a little but dramatically increases the possibility of losing everything, including your shirt.  When you are highly leveraged, a small move can translate to a large profit or loss.  That’s why it is so common for day traders to lose the majority of their account value.  In the day trading world, this is called “blowing up” your account, which is never good news.


Day trading demands discipline and speed.

Day trading is not easy. It requires a tremendous amount of self-discipline.  To succeed, you need to follow through with a sound strategy and be willing to put the time in every day. For some traders, emotion takes over, and everything falls apart. Then there is the issue of speed. Computers now account for the majority of trading volume and algorithms are constantly created that are better and faster at trading than most day traders. 

Chartify can help.

Using every tool available at your disposal is the key to getting ahead in the world of day trading. This means you need to have multiple monitors set up in your home office so you can watch minute fluctuations in prices. It also means that you should constantly search for anything that can give you an edge over the competition. For example, by joining a community of traders like Chartify, you can trade, compare, and even follow top traders until you learn their secrets and increase your success.

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