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7 things you can learn from day trading

7 things you can learn from day trading
Image source: Getty Images


Day trading is a form of investing where you open and close your trade on the same day. If you close your trade the next day, it’s not considered a day trade. 

This form of investing comes with a big warning label: be prepared to invest heaps of time into this along with the money.

But there are other valuable lessons that this form of investing will teach you along the way too. 

Lesson 1: Respect the wisdom of investors like Warren Buffett 

Diversification is possibly the one thing Warren Buffett is most renowned for (apart from all those billions!).

As a trader, part of building a successful portfolio is developing the ability to diversify rather than pooling all your money into singular funds. This means investing across asset classes, industries and funds.

You might experience some major wins in a single day, but losses invariably happen pretty quickly too, often more frequently… Be sure to include other investment types in your portfolio too. 

Lesson 2: Learn to cope with the unpredictable  

While you can have a great strategy in place and have access to reports, market indicators and a ream of information, the market does as it wills.

Day traders need to work out their strategy to accommodate any eventuality, even if it means putting safety measures such as stop-loss orders in place to minimise losses. Predicting winnings before you end your trading day can result in huge losses. 

Lesson 3: Become adept at gauging risk 

Day trading can be a lucrative career, but it’s important to know that it carries a large amount of risk. An entire asset portfolio can be lost in a day’s worth of trading if the proper safety mechanisms haven’t been put in place.

It’s also important to remember that a good run in the morning doesn’t guarantee a good close in the afternoon. Risk needs to be the top consideration throughout the entire day’s trading. 

Lesson 4: Be prepared to change your strategy 

What worked for your portfolio two months ago might just be a losing strategy tomorrow. This is because markets are constantly changing and adapting. While it’s true that an overarching strategy can produce great long-term results, finetuning your sub-strategies can feel like a full-time job. 

Lesson 5: Keep risk at the centre of your strategy 

Research, strategies and the ability to read the market for that day can be a profitable exercise. However, it’s important to remember to keep risk at the centre of your strategy even when the trading is good. 

Lesson 6: Seek help when you need it 

Whether you’re new to day trading or a salted investor, there comes a time where the amount of time spent analysing reports gets a little much. Day trading can be automated with the help of robo-advisors or AI (artificial intelligence).

Lesson 7: Take your time 

As with all investment types, a healthy asset portfolio takes time to build up. If you’re lured into the ‘quick win’ aspect of day trading, you might miss out on a long and lucrative career or side hustle as a day trader. 

Finally, less of a lesson but more an important note: one of the main reasons The Motley Fool does not advocate day trading is the amount of fees this strategy’ racks up! I’m sure most traders will find that these begin to outweigh their profits… Instead, the Fool’s ethos of selecting high-quality listed companies, with shareholder-focused management, that I’m willing to buy and hold for at least three to five YEARS (not hours!) is far more preferable to me.

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The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Mastercard. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, and Tesco.