You may have a good portfolio and want to enter the market as an amateur day trader or you may be fed up with your broker and feel more capable of moving your money yourself. The problem is that you are probably ill equipped in technology as well as education and the chances of compounded losses on top of exorbitant fees are more likely than not. If you are considering going rogue, be sure and take some of this advice into consideration to possibly stave off a potential disaster.
Related Reading: Nifty Intraday Trade Experiment: Hands Burnt and Lessons Learnt
1. You are an Amateur
An amateur day trader is like a little league player trying out for major league baseball. The number one reason amateurs should avoid day trading is just that, they are amateurs. Unless you plan on studying under a trained mentor for a solid year do not even attempt this game of money moving.
2. You Will Lose Big
You may feel that you have a nice cushion to work with but the truth is that unless you are willing to lose and lose big there will be very little for you to trade. Like any profession, success is built on failure and as an amateur going at it alone day trading can be very expensive no matter how many ‘Mad Dog’ episodes you watch.
3. Up Front Capital Can Be High
There is a reason brokerage firms spend thousands and sometimes millions of dollars on trading hardware and software. Trades happen at the speed of light with the last few seconds before the bell as being crucial. Unless you have about ten to twenty thousand dollars to start your own day trading operation (this is start up money, not trading money), chances are you will fall behind simply because you cannot keep up with the technology.
4. Intricate Record Keeping
This in itself is a separate software program that requires precise calculations for tax purposes, profit and loss analysis. Most amateurs cannot handle the daily record keeping requirements along with the stress of trading. It is a job within a job and if you have other responsibilities that take you away from this high focus demand, such as schlepping the kids to school and picking up the laundry, your day trading success will suffer.
5. Your Health
Although you may be sitting in your comfortable home office while trading, the ugly face of stress will grip you tenfold. When it is your money and you do not have much to lose, your health will be affected. Amateurs often have no idea how important it is to leave their emotions at bay. There is no room for mistakes because you are in a bad mood, dealing with surrounding family upheaval or just plain overwhelmed.
Day trading as an amateur comes with a full page recipe for disaster. If you cannot live and breathe the stock market as well as incorporate so much more, amateur day trading is not for you.
Eric Gundlach is a full-time writer who enjoys following the stock market, day trading, and commodities. He also has a keen interest in oil and minerals and often reports on news coming out ofand other drilling sites.