Mistake #3: Day Trading
If you insist on becoming an active trader, think twice before day trading. Day trading is a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader needs access to special equipment that is rarely available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the range of $50,000? You'll also need a similar amount of trading money to maintain an efficient day trading strategy.
The need for speed is the main reason you can't start day trading with simply the extra $5,000 in your bank account: online brokers do not have systems fast enough to service the true day trader, so quite literally the difference of pennies per share can make the difference between a profitable and losing trade. In fact, day trading is deemed such a difficult endeavor that most brokerages who offer day trading accounts require investors to take formal trading courses.
Lesson #3: Unless you have the expertise, equipment and access to speedy order execution, think twice before day trading. If you aren't particularly adept at dealing with risk and stress, there are much better options for an investor looking to build wealth.
Labels: Fundamental Analysis