Investors who have no great patience to wait until their individual shares or ETFs or funds throw a decent return often try their luck with day trading. To what extent such short -term speculation are worthwhile?
• Traders and investors differ fundamentally
• Day traders usually act CFDs instead of shares
• Only 24 percent of dealers make profits
Day trading describes a trade method in which special financial instruments, which are often equipped with a lever, are bought and sold several times within a single day. With the help of this so-called inner day trade, the investor thus pursues the goal of taking advantage of short-term movements on the market in its favor and achieving a quick profit.
Day Trader vs. long-term investor
In contrast to classic buy-and-hold investors, Day Traders, as soon as you have bought a position on the market, are constantly concerned with the price movements of the respective underlying in order to be able to react to any small change. Accordingly, the inner day trade needs a lot of concentration, strong nerves and of course time. Because DAY traders have to make irrevocable decisions within a very short time to make quick profits or to limit excessive losses, which have a direct impact on personal profits. As a result, Day Trading is the opposite of a conventional investment strategy, which usually goes hand in hand with a hold of at least five to ten years.
Another very concise difference, which separates a day trader from a long-term investor, are the very different approaches. While a classic investor mainly focuses on the fundamental data of individual companies or ETFs and funds, a day trader only focuses on the chart technology of a respective underlying. In the case of inner day trading, the focus is mainly on liquidity, the trading volume and the volatility of the respective asset. Contrary to the conventional investor, the Day Trader prefers basic values that have a very high volatility. In this context, it is not really important for the trader what basic value it is.
The classic markets and instruments for day traders
While young traders, who are often relatively inexperienced, mostly specialize in stocks and indices, are often more experienced speculators more with raw materials, cryptocurrencies and foreign exchange. The foreign exchange market, which offers a large amount of different currency pairs and high liquidity, is one of the most classic markets for day traders.
However, traders who act, for example, do not invest directly in dollars or yen, but only in differential contracts. These so -called CFDs (Contracts for Difference) are derivatives that derive their performance from a special basic value. Compared to the equity investor, the CFD trader does not acquire a direct company participation, but only a claim that allows it to participate exclusively in the course development of the underlying. CFDs have the great advantage that they offer the dealer the opportunity to lever the capital used. With the same capital, the CFD dealer can move more money on the stock exchange than with a direct investment. In addition, CFDs offer the opportunity to benefit from increasing and falling price nodes.
An inner-day dealer needs these core competencies
In addition to an account with a CFD broker, people who want to actively join the day trading also require a fundamental understanding of the chart analysis, as well as a maximum of discipline and mental strength. In addition, as a dealer, you need an individual strategy, which must be observed at any time. Because traders who only run after the market movements and change their approach and procedure every day will most likely suffer financial shipbreak very quickly.
In addition to the basic knowledge of technical analysis and a personal strategy, traders naturally also require a lot of courage and sufficient self -confidence to be able to process lossy business, which of course belong to the daily business of every dealer. Because nothing is more unrealistic than the expectation to make every trade with a profit. Good day traders are characterized by the fact that they cannot be frustrated by losses, but immediately accept, analyze and eliminate their mistakes.
Can you really get rich with day trading?
Of course, it is not excluded that you can earn a fortune with Day Trading, nor is it excluded that you become a millionaire with a lottery ticket. However, the statistics clearly show that around 76 percent of small investors who try to build up a quick assets in CFD trading will lose their money. Accordingly, you can not generally answer the question of whether you can really get rich with day trading. In the majority of cases, however, it is the case that inner day dealers achieve a loss in around three quarters of their trades. So it is three times as likely that you lose a fortune with day trading instead of earning a fortune.
However, these high risks are usually known to every day traders, since the average probabilities of winning must be communicated openly by the individual CFD brokers. Due to an individual form of systematic misjudgment of personal skills and competencies, the majority of the Day traders still believe that they are permanently among the lucky 24 percent that earn money in internal day. Accordingly, some brokers are currently booming, because the volatile market phase is now leading more and more people to supposedly lucrative speculation on the stock exchange. In the first line, only the brokers and stock exchange places earn in these shops, but not the small investors.
Goethe’s Mephisto already knew the dark -sided wild speculation and warned Faust: “A guy who speculates is like an animal, on Dürrer Heide led by his evil spirit in a circle, and around the whole, beautiful, green pasture.”
Pierre bonnet / finanzen.net
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