Dangers Of Day Trading Stocks
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Many people think that day trading of stocks is investing; but the truth is far from it. Most investors who indulge in trading stocks generally spend time studying and researching businesses. After the research, they carefully select stocks and then they try to hold the stocks for a long period of time realize gains. These investors think they are part owners of companies whose stocks they have purchased.
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On the other hand, day traders spend most of their time in front of their computer tracking the movement of stocks and accordingly placing their order. In day trading stocks, investors or traders will place many orders right through the day and they will not hold for more than few hours. Their main aim is to move the stock in the shortest possible time to make as much money as possible.
There are dangers of day trading stock and according to the Washington Post, 90 percent of day traders are washed out within the first three months of trading. It is believed that most day traders lose all their money and that is why Securities and Exchange Commission recommends that people indulge in day trading stocks with money they can afford to lose.
The people who gain maximum benefit from day trading stocks are those who run day trading firms. These firms give day traders the trading equipment and charge them a commission for each trade they make. With day traders trading the entire day, the money piles but pretty soon. This would explain why regulators are busy investigating these outfits and the industry in general.
A study conducted by the North American Securities Administrators Association says that just 11.5 percent day traders are successful and trade profitably.
There are many articles that highlight and profile successful day traders but the fact of the matter is that for every successful day trader, there are hundreds, if not thousands, of failures. The dangers of day trading stocks are immense and one should be aware of them before indulging into day trading.
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