Day trading is something that comes with a lot of misconceptions. Some people believe there is something shady about moving in and out of stock positions on the same day. However, day trading is a real investment strategy and can be extremely profitable for some.
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If you’ve been thinking about starting day trading, you’ll want to keep reading. We’re going to debunk some of the biggest myths surrounding day trading.
1. Day Trading Will Make You Rich
Some day traders will lead you to believe you’re guaranteed to become rich by day trading. For some, this is going to be a true statement. Successful day traders do have the ability to become rich. However, this isn’t going to be the case for everyone.
Becoming successful and wealthy from day trading requires a commitment. You need to learn the ins and outs and strategies other successful traders have implemented. If you’re willing to put in the work, you’ll have a much better chance of becoming rich.
2. Day Trading Is a Scam
There are people who will lead you to believe that day trading is just one big scheme. They believe select individuals take on large positions in certain companies, try to build momentum for that investment, and then dump the stock once day traders have started piling in.
While pump-and-dump schemes like this are real, there is much more to day trading. Traders take on positions because they feel they can take advantage of small price swings during the trading day. This could be because certain technical indicators show an upcoming price movement. Or there might be higher than normal chatter about a certain company. Whatever the reason, day trading is a real investment strategy that can be profitable for some.
3. Day Trading Doesn’t Require Strategy
Another common day trading myth is that it’s a lot like gambling and has no real strategy behind it. Yes, you could make a bunch of trades and hope for the best; the most successful day traders have a strategy behind each move they make. They understand the markets and have developed a method to find pieces of data that can lead to successful trades.
4. You Need a lot of Money To Start Day Trading
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Some people believe that day trading is only for the wealthy. Yes, the dollar return on a 10% profit will be much higher with a $100,000 account than a $500 account, but trading with a small amount of money is possible. However, the one thing to remember when trading with a small balance is that your margin for error will be much lower.
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This article originally appeared on GOBankingRates.com: 4 Common Myths About Day Trading
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