What you need to know before day trading
Day trading spiked during the coronavirus pandemic, but it’s risky business – especially if you don’t know what you’re doing. FOX 5’s Dana Fowle explains some of the pitfalls of the practice.
ATLANTA – A lot of new habits formed while we were hunkered down over the last year. Many good ones. But some folks used the time at home to start day trading.
Day trading has been described as gambling. Or if you do well, more like winning the lottery than being guided by financial strategy. It’s dangerous to try to make money this way.
First, let’s talk about what day trading is. It’s when you buy and sell a financial instrument — like a stock or bond — in a single day. Maybe a few times a day. It’s generally done online and it’s based on short-term price fluctuations, not based on a long-term financial strategy.
It’s not a recommended way to manage short-term savings or your retirement. It’s risky.
I talked wealth advisor David McInnis of the East Paces Group who told me that most people simply are not successful at day trading and can lose their life savings very, very quickly.
“The vast majority try it for a month, after a month of day trading, generally they’re out of the market. Most people, I think the overwhelming statistics are that most people try it for a year, then after a year, the vast majority have lost money or have stopped day trading altogether.”
Long-term investing is a better strategy. If your office offers a 401K, do it. If not, try a Roth IRA or a traditional IRA. These are retirement plans.
If you are interested in investments for savings that you don’t want to pocket for retirement then look into taxable brokerage accounts. See a financial planner.
But whatever you do, don’t gamble with your savings. And while I have you here, you should save 20% of your income. It’s tried and true: It works.
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