Day Trading Carries Considerable Risk, and Failure Can Be Quite Costly

Day Trading Risks

The United States Securities and Exchange Commission (SEC) has expressed growing concern about the increasing number of people who falsely believe that day trading is a sure fire get rich quick strategy. In 2001, the SEC enacted rule changes that were proposed by the NYSE and the NASD in order to limit day trading activities. People who were found to have day trading patterns are now required to have a minimum of $25,000 in their account and are only allowed to trade in margin accounts.

Risky Business

Day trading is not illegal or unethical in any way as long as guidelines and regulations that are set forth are strictly adhered too. Most day traders incur losses when they first begin their venture. It is for this reason that only expendable money should be used to undertake day trading practices. Experts warn against using money that is needed for normal living expenses. The concentration that is required of a day trader can make the lifestyle difficult. Most day traders sit in front of their computers for hours on end trying to determine market trends and keeping track of their stocks. Day traders also dole out high commissions to brokerage firms as well as paying for real time information services. Many day traders end up in debt because of the enormous amount of time and skill required to trade stocks on a daily basis.

Recommendations

Day traders should know what their daily costs are and know how much profit on a given day that they need to make in order to break even at the very least. Day traders should look into the risks associated with using borrowed money to buy and sell stock. People who are thinking about become day traders should ask the firms with which they plan to operate about the statistics on how many day traders have prospered and how many have failed. If the firm does not know these statistics or is unwilling to divulge such information, it could be a tip off that using that particular firm is not the best choice. Always check to insure that a firm that handles day trading affairs is registered with the SEC.

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