Introduction:
For a lot of people, day trading seems like an exciting but difficult way to make money—and it can be. But if you do your homework, stay focused, and practice, it is within reach for anyone. Unlike in most jobs or other careers, day traders can build their own hours around their lifestyles—if they want to work at night while sleeping during the day or only on weekdays when they have time off from school or work, that’s totally up to them!
In some ways, that kind of flexibility is both a blessing and a curse: It can let someone take advantage of opportunities quickly but it also means that he has to be incredibly disciplined about making sure he doesn’t let his emotions get away from him in real-time as he trades online.
Trade-In Stocks With Low Capital Requirements
Trading in stocks is a great way to earn a nice return on your money in a short amount of time, assuming you can do it well. It’s not necessarily easy to do it well, however, but there are some options that don’t require much capital outlay to get started, so they might be a good option for you.
If you do have funds available that you want to use as capital for trading in stocks (or if your regular job allows you extra time during which you can trade), then read on to learn more about day trading versus long-term investing. There are several things to keep in mind when thinking about these two different methods of stock trading.
Get Exclusive Entry Into Hot ICOs
With a utility token, early buyers get access to a platform or network at a discount rate. This creates an incentive for people to jump on board—similar to getting priority boarding on an airplane—and helps new companies build communities around their products or services from day one. This is why ICOs can be such powerful tools for startups, allowing them to fund their projects while engaging with potential users, all at once.
However, not every project will have its own ICO; many startups simply choose to raise capital through traditional funding channels like venture capital firms or angel investors. There are benefits to each route—utility tokens give you discounts and other perks, but traditional funding lets you own equity in a company—so don’t feel like you have to pick just one option.
Learn From Professional Traders
When it comes to trading on your own, you have an advantage: You can learn from other people’s mistakes (and successes).
Learn from successful traders who failed initially but still learned from their experience, including William J. O'Neil and Linda Raschke.
These people all made mistakes early in their careers that taught them how to improve for future trades—and improved their returns significantly as a result.
(Bonus) Only Focus on Trading When There Are Market Fluctuations
Though there are a number of investment strategies you can follow to make money investing, they all rely on one crucial factor: making smart decisions with your capital. This is why it’s important to remember that no strategy will work every time; in fact, if you study successful investors, many times they don’t stick to just one strategy because different situations call for different types of investing.
For example, Warren Buffett has been known to invest in stocks, bonds, real estate, and even commodities like gold when he sees an opportunity. So while day trading may be profitable sometimes, other times it might not be—and focusing only on day trading could hurt your overall portfolio performance.
Long-Term Investing Works Best For Investors Who Aren’t Afraid To Lose Money
If you’re not terrified of losing a portion or all of your investments, then long-term investing is probably right for you. It also works best if you have a strong stomach—the kind that keeps you from flinching when stocks plummet 20% in one day (or more).
There are plenty of professional investors who find themselves puking over such daily ups and downs in their portfolio value, but if your mind can remain steady through market fluctuations, then it makes sense to invest with a long-term outlook. Remember that while market performance is always a question mark, there’s no certainty that day trading will be a better option either!
Underperform the Market? Buy More!
So, you’ve decided to invest some money in stocks, bonds, or mutual funds. But what kind of return should you expect? The historical average for stocks over long periods is about 10% per year, so if your stock picks give you 8% a year, that’s an underperformance that might be better left alone (for now).
What do I mean by might be? Well, if you believe that markets are more efficient than ever before and returns will trend lower in coming years (and a few leading experts say they might), then investing your money into blue chips may still be worth it—even at subpar returns.
Set Up an Investment Plan with Goals, Guidelines, and Reasonable Expectations
The first step to investing is setting up a simple plan that defines your investment goals, how you'll achieve them, how much time you'll spend researching investments, and how much money you can reasonably lose when stock values fall short of expectations. Plan on saving aggressively from your income (as high as 15 percent) once your emergency fund is fully funded.
Then take advantage of tax breaks like 401(k)s and IRAs by contributing in order to reduce taxable income—and increase retirement savings power—by 30 percent or more (we have several recommendations in our Ultimate Retirement Guide). The next step is to set up guidelines for investing strategy: How will you protect your assets during large market downturns?
Accept That There Are Times When No Investment Strategy Works
There is no reason to be discouraged if you do not pick a strategy that performs well over a long period. Some people are very good at trading but poor at investing, so if that’s your strong suit, stick with it. Others don’t know how to make investments but have a great ability to pick good stocks based on analysis, so go with what you’re best at doing. At times in market history, no single strategy works exceptionally well—the trick is sticking with what works best for you at any given time because when one strategy disappoints.
So never give up hope. In fact, just accept that sometimes even experts can get it wrong! And remember: No matter which strategy you choose, never bet more than 5% of your net worth on any investment (stocks or otherwise). The worst thing that can happen is losing 5% of everything you own; therefore it doesn’t matter if a particular investment tanks—you won’t lose all your money!
and... Never More Than 5% Of Your Net Worth On Any One Investment: This may seem like an arbitrary rule but actually has quite a logical reasoning behind it. If you have $10 million invested and then you're $500k (half a million dollars) on each individual investment.
Conclusion
When it comes to long-term investing, your heart wants what it wants, but when it comes to your money, you should have a reason for moving in any direction. In short: Both day trading and long-term investing are equally viable ways to earn a living or build wealth. If you're interested in making money quickly on relatively small sums of capital or starting a business that you plan to eventually sell for a hefty profit (aka exit strategy), day trading could be right for you.
But if you're thinking about putting retirement funds into stocks or mutual funds, or want more control over how much is involved in your investment portfolio, then long-term investing is probably better suited for your needs.