(Newswire.net — April 24, 2020) — Day trading is one of the most confusing and often misunderstood ways to build wealth with securities like stocks and other assets. There seems to be two types of people in the market when it comes to day trading. There are those who think that this kind of investment is an easy way to make money every day without maintaining a regular nine-to-five job. At the same time, there are individuals who think that no one can succeed by regularly opening and closing positions unless they have expert training. The truth is that while some people can become rich and give up their day job with regular investments, it’s not something that happens overnight. At the same time, while anyone can start this method of buying and selling, it’s important to have the right day trading strategies – even if you don’t have training from an expert mentor.
Understanding How Trading Works
When you first get started with buying and selling investments in any market, there are plenty of things to learn. You need to learn how to open and close positions with the right brokerage, and you need to figure out how you’re going to pick the shares that you want to spend your money on. Those things alone can take up a lot of your time. However, the deeper you get into this world, the more you’ll discover the little nuances that separate different kinds of traders. For instance, when you get into day trading on a regular basis, you could start to be classified as something called a PDT investor, or pattern day trader. This essentially means that you open and close at least four positions over a five day period, and those actions account for at least 6% of your activity as an investor.
While becoming this kind of investor can open you up to new opportunities, like extra leverage and margin that you can use to make more cash without making large down payments, there are downsides to consider. For instance, the day trading rules dictate that PTD individuals must always have $25,000 in their brokerage accounts. If you have less than that in your account, you could lose some of your privileges.
Are These Rules a Bad Thing?
On the one hand, regulations about how much equity you need to have in your account at any given time can put you under additional pressure and make it more difficult to track your sales and purchases. However, that doesn’t necessarily mean that rules are always a bad thing. It ensures that the environment isn’t a free for all space where anyone can get involved. For new traders, the presence of the rule means that you need to be smart and think about how you’re going to create the right trading plans. Two or three good trades in a single week is all that’s necessary to begin with. It might take a little while longer to make your account stronger this way, but it gives you time to learn and grow too.