Day Trading – Do you have what it takes?

Opinion: Canstar’s General Manager of Wealth, Josh Callaghan

Too often, when people ask me about investing they immediately jump to the idea of day trading. Sitting in front of screens, looking at complex charts and riding the rollercoaster of the markets. Sometimes referred to as the world’s biggest casino, many investors are drawn to the dream of getting rich quick. Unfortunately, in my experience not everyone is cut out to be a successful day trader, so let’s take a look at what it takes and who it might suit.

Are you good at maths?

Let’s get right to it. Day trading is more than eyeballing graphs and going with your gut, it’s a highly detailed and numbers heavy analysis of price movements, volume and the underlying companies. When talking about averages, most people struggle to define the difference between mean, median and mode. The standard day trader’s tool box includes exponential moving averages, Fibonacci sequence and Bollinger Bands. If these concepts put you in a spin and you have no desire to dust up on the details, then day trading might not be for you.

Do you have lots of time and can you be really flexible?

Once day traders have settled on a strategy, or more likely a select few strategies, they then typically wait for the right lead-ins to hit for them to enter a trade. There are three levels of automation when it comes to monitoring and executing your trades that all require lots of time.

Some traders are fully manual, meaning that they will have all the relevant information at hand and will manually monitor the relevant signals to identify when to set a trade up. These traders will need hours to sit at their computer.

Day trading

Some traders will employ alerts and other monitoring programs to give them a heads up when a certain strategy is coming together and it may be time for a trade. These alerts can happen any time of the day or night. The trader will need the flexibility to drop what they’re doing and manually manage the execution.

Then there are those who employ computers to do the monitoring and execution of their trades. This requires a lot of time upfront to develop the algorithms and then ongoing time to continually monitor and adjust the algorithm. This aims to ensure that the algorithm is performing as expected, as any unexpected results could be very costly.

As the name suggests, day trading could literally become your day job. It will likely require a high level of commitment and time, any less is likely to result in losses.

Do you truly love following the market?

Day traders spend hours submerged in charts, numbers, economic data and whatever else they think will give them a trading edge. It can be absolutely thrilling when you’ve done all the hard work on developing a strategy and you’ve seen the set-up, executed the trade and exited with a profit. It can also be mind-numbingly boring, repetitive and lonely. If chasing fame and riches are your only motivating factors, then the days and weeks where nothing is happening in the market can be even more difficult.

Are you disciplined?

The day trading world is full of big talk and bravado, with stories of fortune and nerves of steel. The truth is that successful traders tend to be very disciplined about how they exit a position, that is, at what point they sell. Before entering a trade, they will have a clear idea of at what point they take the profits and where they stop the losses, and they will stick to that.

Successful traders also typically have the patience to wait for all their strategic signals to turn positive before entering the market. And they will stick to their strategy rather than try to create value on the fly. Especially when it’s your money on the line, being disciplined is hard but it’s perhaps the most important attribute of a day trader.

Day trading

There is no denying that day trading is full-on and takes a great deal of dedication. Although, if you answered yes to all the above then day trading may be worth considering. If any of the above doesn’t sound like you, then the myriad of other investing options might be a better fit.


About Josh Callaghan
Canstar’s General Manager for Wealth, Josh Callaghan, has accumulated more than 15 years’ experience in banking and finance, with in-depth product knowledge across retail banking, stockbroking, life insurance, health insurance and superannuation. Josh’s experience combined with his passion for new technology and active role in the fintech community has positioned him as a credible thought-leader on the future of finance. Through his work at Canstar, Josh is striving towards a goal of creating a world where building and managing wealth is easy for all consumers.

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