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Risks of Day trading.


Eric
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Hi Eric,

Day trading is the purchase and sale of the same securities within one single trading day. It is most common in stocks and foreign currencies. The practice however is highly risky especially for people who are still novices in the stock trading business. Some of the major risks associated with day trading may include;
Unless you have sufficient knowledge, skills, and a working strategy, you stand a chance of making huge losses in day trading because of the complexities in the stock market, which can be uncertain and very unpredictable.
Since the stock markets are often full of uncertainty, Day trading can be stressful because as a day trader, you will have to spend several hours during the day watching the charts and looking out for opportunities, which may or may not come.
Day trading can turn into an unhealthy habit likable to gambling. Most people who day trade often lack the financial discipline to accept losses. Instead, they end up doubling or even tripling their trade sizes in an attempt to recover previous losses. This leaves them vulnerable to the total loss of their investment capital especially if they experience consecutive losses.
Fear and greed are some of the major factors why day trading is risky. The habit of recovery lost trades leads to the bigger problem of over trading in stock with huge volumes that significantly increase your brokerages and taxes.
Having a proper trading strategy and the financial discipline can significantly help reduce the levels of risks associated with day trading. A proper trading strategy will ensure that you accept and cut your losses in time when a trade fails.
The other downside to day trading, which is another risk factor, is the problem of proportionate risk-reward potential. Day traders can easily be enticed by taking small profits and they end up continuing with trades even though they make more losses in return.
There are several other reasons why day trading is risky. The best approach for those who want to attempt day training is to acquire as much knowledge and information as possible, develop a proper trading plan and stick to it and always making sure to put up stop losses for every trade attempted. 
 

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