Is it worth it to try out day trading? A majority of financial advisers say that it isn’t. So why do they say that? Day trading – which involves quickly purchasing and selling stocks over the span of one day – requires a lot of resources and time. According to more traditional investment advice, it is much better for you to seek long-term opportunities that offer the chance for solid performance instead of quick day trading results. Although there is nothing wrong with this advice, it does ignore the fact that there are some people who are able to make profits with day trading.
Binary options have recently become very popular, with many investors diversifying their portfolios with this type of high-return investments. In fact Forex is being replaced by binary options as the hottest new trading option.
Since I’m not an expert when it comes to finances, I wanted to learn more about day trading so I could have a better understanding of the risks and rewards that were involved. Here is what I discovered.
– Drawbacks to day trading – low reward, high risk.
Although initially the fast action might be very exciting, a majority of people who get involved with day trading do not have the proper tools or basic knowledge to succeed with it. As Motley Fool reports, this results in approximately 80 percent of all day traders ending up in the red. Also, given that day trading profits are taxed by the IRS as ordinary income tax rates instead of long-term capital gains, you will end up paying a large amount of taxes to the IRS if you do end up making a profit.
Day traders wanting to earn money search for stocks that have a high “beta.” The beta is what quantifies how quickly a stock is able to rise or fall inside a certain market. Some businesses are more volatile than the overall market. In 2014, Motley Fool analyzed some of the more common day trading stocks, specifically searching for betas in order to make a determination whether or not those stocks were a good thing to invest in. For example, Weight Watchers at that time had a 3.34 beta, meaning that this stock could fall (or rise) 3.34 times faster than the overall market. If a trader is able to get in on the bottom of a stock’s fast rise and sell it high, a great deal of money could be made quite rapidly. Day traders choose these types of stocks that offer quick profits due to high trading volume.
Day traders consider penny stocks also. Although penny stocks trade for a maximum of $5 per share, the stocks can still result in large profits because of the high trading volume involved. Some sheer luck and a great deal of research is involved when this kind of approach is taken with day trading. Most Americans won’t have enough time to put in this kind of effort into the market. That is why usually most investment professionals recommend that a slow and steady investment approach be taken.
Say that 20 years ago you invested $10,000 in Pfizer or Texas Instruments. These investments today would be worth $113,400 and $145,700 respectively. On the other hand, if you were to invest $10,000 into day trading, you could end up losing all of your money. If you invested in Eastman Kodak, your $10,000 would only be worth $3,5000 today. So with every investment there is risk involved.
– Advantages to day trading – strategies involving binary option trading
Binary options are a kind of financial investment tool that is used by day traders for holding positions on an asset’s future direction, such as a currency exchange rate, commodity or stock. A binary option is basically a way of placing a bet that a certain asset’s value will either decrease or increase. The underlying asset is not actually owned by an investor.
AnyOption is a kind of new online trading tool that offers educational resources for helping investors become more familiar with how best to trade binary options and earn money from them. AnyOption states that with binary trading the first thing you do is select an underlying asset. Next you select your “expiry time” – which is how long the trade will be open. Then you will select a “put” or “call action,” before finally investing your money. Although there are various binary option strategies, all of them provide you with fast returns. What is even more important is that since in binary option trading you take a position with an asset instead of investing in it, you have the ability to profit from both falling and rising markets.
A trading platform needs to be used for trading binary options. Search for broker-regulated platforms offering a wide range of various underlying assets with genuine customer reviews. Although you can’t please everyone all of the time, a reliable and trustworthy platform should have plenty of positive reviews associated with it.
Although day trading involves a lot of risk, Forex trading or binary options trading are two ways that allow you to participate with less risk. If your time is limited for devoting to day trading, then it’s probably not the best option for you. However, if you are looking for a new option that can provide you with quick profits, you might want to further investigate binary options trading strategies. Before you get started, think about f a practice account set up in order to familiarize yourself without losing any real money.