Advantages and Disadvantages of Day Trading

We live in a world where the economy is changing day by day. It is logical to understand that an economy grows, the same way corporate earnings go up too.

Since economic growth tends to create income, you will notice a more significant paycheck from your employer, which will increase the buying power and money will circle. This is the most crucial business cycle that drives our economy.

If we analyze the stock trading and everything that goes with it, the annual return tends to reach up to 10%, and when we compare that with an inflation rate of 3.2%, it means that you will be able to make a long-term investment with ease and to hold it and resell it before it drops.

There are a lot of providers who can help you make a thriving trade like Morgan Woods, with their capability of helping people that do not know anything about stock markets. However, before you check their website, you should stay with us to learn more about the advantages and disadvantages of day trading:

Advantages

  • Simple To Buy – The best thing about the stock market is the possibility to purchase shares with ease. You will be able to find appropriate and certified financial planner, broker or do it yourself online. As soon as you create an account on some official site that will give that opportunity, you can start, but have in mind that first, you should learn more about it.
  • Two Ways Of Making Money – Most people that decide to invest understand one particular reason and that is buying low-selling high. The idea is to invest in the fast-growing company and to gain a percentage of income based on its value. That is the perfect choice for both buy-and-hold investors and day traders too. Day trading (click here to learn more about it) represents taking short-term trends, with the goal to gain profit as soon as possible. Other traders will choose long-term investment so that they can stay and analyze the growth before they sell. In both cases, they want to outperform the market by selecting the business and stock that will raise and give them the ability to earn a profit. Other investors will tend to gain a regular stream of cash, which means that they will purchase the company‚Äôs stocks with the goal to obtain money from dividends.
  • Simple To Sell – the Stock market is a great thing because it will allow you to get out of the trading and to sell your stock as soon as you decide. This is an important consideration especially if you need some money in a matter of hours. Since most prices tend to be volatile, have in mind that trading brings a particular risk that we will present you in disadvantage paragraph.

Disadvantages

  • You Can Lose Everything – In case that you decide to invest in a company that does poorly, or if other investors decide to sell, that will create plummeting stock price which means that it will decline and you will lose your investment. As soon as you sell, you will lose the initial money you gave, and if you cannot afford it, the best thing that you can do is to purchase a bond. That way, you will gain an income tax break which is great especially if you lose the initial investment. However, you have to pay taxes, which means that you will have to create a calculation that will provide you with enough money after capital gain tax (check out what capital gain tax is and what it represents on this link: https://en.wikipedia.org/wiki/Capital_gains_tax) and other expenditures.
  • It Requires Plenty Of Time – Trading is not gambling where you place a bet on red and wait for it to happen. The idea is to read and research every company so that you can determine whether it is profitable to purchase stocks and what will happen in the future in case that you invest. You have to learn to read annual reports and financial statements, as well as follow everything that happens in the news. You can also monitor the stock market, and to check the yearly fluctuation of company values so that you can determine where to invest.

However, you should understand that trading and investing in stocks could also give you emotional inconsistency because stocks tend to fall and rise every second, which could overwhelm some individuals.