Day Trading Advantages

Day trading can certainly have its advantages in the stock market.  Here are a few reasons why it can be a good idea to day trade, if you know what you’re doing.

1.       Shorter Time Frame

The benefit of a shorter time frame is compound interest.  The shorter your time frame is the greater compound interest will either work for you or against you.  So for example if you could make .5% a day you would almost quadruple your account in 1 year.

Now of course there are days when you would lose money, but if you win a little on average it can be very powerful and very profitable.  Think about it, how much would you really have to make on an average day to be up 20 or 30% in a year.  Not that much and most investors would kill for that kind of a return.

2.       No Worries After the Markets Have Closed

If you cannot stand worrying about whether your stock will gap up or down tomorrow, then day trading can help you.  If you are day trading you want to be in and out of the markets all within one day.  So you would not have to worry about what will happen overnight, because you are not in the market.

You do not own any stock during that time.  That is one of the major benefits of trading only when the market is open.

3.       You don’t Have to Worry About Fundamentals

If you are in the market for a few days, weeks, or even months you’ll find that the market is governed by two things, technicals, and fundamentals.  The longer your time frame is the more you have to look at the company’s fundamentals to decide if it really is a good buy or not.

When you are day trading however it is mostly technicals that you are looking at.  There might be a few big surprises, but in general it is about technical analysis.