A new article from the Securities and Exchange Commission is directed at investors and makes a couple of great points. Day trading is serious business and not something you just dabble in for fun, particularly if you are using leveraged investment strategies or trading leveraged products.
Day trading involves actively buying and selling securities within the same day, trying to capitalize on short-term changes in price. Those involved in day trading often borrow or leverage capital each day in order to purchase additional assets−but it also substantially increases your risk. This sophisticated level of investing requires meticulous market and news monitoring is fast-moving and involves a large amount of speculation.
- Keep in mind that there are hundreds of professional day traders out there, and you will be competing with them, as well as the traders and analysts from the 4,000 brokerage firms in the United States. It is a pretty safe bet that they know more than you, have more experience than you, and have better equipment and software than you.
- Day trading is a complicated and risky form of investing. Bottom line−unless you understand the risks you’re taking, and the economics and performance of leveraged investment strategies, such as trading on margin, or using options or leveraged products, you should not engage in day trading.
- Day trading is not for the faint of heart as it involves minute-to-minute decision-making, as well as leveraged investment strategies that can lead to substantial losses.
Investor.gov has free tools and resources to help you learn how to save and invest wisely.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.