Daytrading requires serious commitment from the trader and more importantly from his/her family. Anybody considering daytrading should ask some questions to himself/herself before taking it on as a full time/part time career.
Questions to Ask
If you are planning to give daytrading a try, here are some preliminary questions which you should ask yourself before starting out. The answers will help you decide whether or not you are ready to take the plunge into the risky business of day trading.
Why do I want to daytrade?
Ask yourself why you want to day trade. Is it because you perceive day trading to be a relatively easy way to get rich quickly? Is it because you noticed other people getting rich doing it?t. If so, be aware that none of these reasons are valid reasons to commence day trading. First, although one can make a lot of money day trading, it is far from easy to do so, and the risk of large losses is often there. Second, successful day traders have a true love or passion about their trading activities. If you are not willing to spend lot of time learning, reading about new trading strategies and working independently in a fast-paced environment, then day trading is probably not for you. In other words, day trade only if you think you will enjoy the challenge, and are prepared to spend considerable time to acquire the knowledge and experience necessary to become successful.
Do I have enough capital to day trade and is this money I can risk?
Even if you get past the previous question, and conclude that day trading is something that you would truly love to try, you must ask yourself whether you have sufficient liquid capital on hand to effectively day trade. Although opinions differ, $10,000 is about the minimum capital required. Further, this should be “100% risk capital”. In other words, if you were to lose the whole of this capital, would there be any significant negative effect on your finances and would you be devastated at losing it? Day trading is an extremely risky venture, and you must be able and prepared to assume all of the risk. Can you afford to? If not, do not day trade.
What experience/knowledge level do I have?
One of the main reasons beginning day traders fail is a lack of training, experience and knowledge. Ask yourself how much trading training, knowledge, experience you have. How long have you been involved in the markets as a trader? What do you know, and what is your training and knowledge level, concerning the markets you are interested in. Are you familiar with the following terms: Bid, Ask, tick, market order, limit order?
If you are not, you would be fool-hardy to risk your money day trading. Do yourself the favor of educating yourself before you risk a dime of trading capital.
Just a Start
The questions posed above are by no means all of the questions you should ask before you commence day trading. They do however provide a good start, and should help you decide if you are likely to be ready for day trading and whether day trading is for you. Should you decide to commence day trading, read other articles on this site that are of particular interest to novice day traders.