Why is day trading dangerous

Definition: what is day trading? Explained for beginners

For many investors, the word “day trading” is the epitome of the dream of earning full-time money on the stock market. But many inexperienced stock market entrants ask themselves: What is day trading anyway?

I have simply explained the term for beginners.

Definition: what is day trading?

Day trading is the name given to stock exchange transactions, i.e. purchases and sales of values ​​that are made within a day (as opposed to normal trading). These are positions that are opened or bought and then closed or sold only a few hours, minutes or even seconds later.

A day trader, this is how an investor who operates day trading, tries to make profits with quick trades (what is that?) And small price changes.

More basic facts about day trading:

  • The ultra-short trading within minutes and seconds is also called "scalping".
  • Why is it important for day traders to sell open positions on the same day? Above all, you want to avoid gaps in the course that are difficult to calculate, known as “gaps” in technical terms. Gaps can arise when positions are held overnight.
  • Most day trading is done with highly leveraged derivative financial products, i.e. in the form of CFD and Forex trading (What is CFD trading? / What is Forex?). As a result, you can achieve enormous profits or losses with small price changes. Crass example: A share rises + 3% in one day. With a certain long CFD on the stock, + 60% would have been possible. But: If the stock had fallen -3%, the long CFD would have crashed -60%.
  • Day traders usually try to anticipate future price developments on the basis of current reports and / or above all on the basis of the technical chart analysis.
  • The tempting thing about day trading is the quick, high profits that are possible. But many investors who love risk and thrills are also drawn to day trading. Speculative day trading is therefore in stark contrast to long-term securities trading or the buy & hold approach, where stocks are held for many years, for example (such as my stock strategy, which I present in a book: How to find the safest top stocks in 12 steps finds).
Tip: Anyone who has stock market experience & trades despite the increased risk of loss
want to get in, should initially rely on expert help (here is my recommendation *)

Warning to newcomers: With day trading you can quickly suffer very high losses

Since day trading mostly takes place with high-risk financial instruments such as CFDs, this type of investment is very risky. The whole thing is only for experienced investors who know what they are doing and can correctly assess the risk.

In the long run, day trading is also very stressful psychologically, as you often have to make serious investment decisions quickly and also have to cope with wrong decisions.

In any case, it is very difficult to make good money with it in the long run. A lot of experience, knowledge, strong nerves and perseverance are required. So becoming a good day trader is anything but easy. Therefore, there seem to be few really successful day traders.

Here is a tip for unteachable and risk-loving investors ;-) ... If you want to get a taste of day trading despite the high risk of loss, you can do so with the help of a mostly free demo account. So you can practice trading with play money without any risk.

I have more information ready here: Demo account - practice CFD and Forex trading with a demo account. Anyone interested can then get an idea of ​​how dangerous day trading is, especially for a beginner.

In addition, if you are interested, you should definitely read various literature on the topic of trading.

Here are a few day trading book recommendations:


Closing article tips: