You might think most day traders are male. They are, for the moment.
There is an increasing number of female day traders – of ALL ages. This is especially true in Australia – 45% of Australians who started investing in 2020 were female.
Buying stocks is no longer an oldies' game either. In 2020 over 40% of Australians in their 20s and 30s invested in the stock market for the first time.
It looks like Covid-19 has changed the investment scene permanently. While people have been locked down, it looks like they have been learning how to trade.
Trading vs. Investing
The two terms are often used interchangeably, but they have different meanings. Yes, traders and investors both buy stocks, but that is the only similarity.
Traders invest for the short-term; they watch their positions constantly and sell soon after buying.
Investors buy and hold stocks for their long-term growth, often holding stocks for years.
What Is Day Trading?
Day traders buy and sell within one day. The cardinal rule is to never hold stocks overnight.
You can trade individual stocks, indices, or forex. Trading an index like the S&P ASX 200 is the safest way to start as a day trader. If you trade individual stocks you need to trade multiple stocks in different market sectors to diversify your portfolio. If you put all your money into one stock, or even one sector, you risk losing a lot of money if news comes in that only affects that sector of the economy. Trading an index means you hold a contract for every company in the index. Your exposure to bad news is reduced.
Day traders can use CFDs to make money whether the market is rising or falling. When you take out a CFD (a contract for difference), you enter a contract to pay the seller the difference in value over the life of the contract.
You can go 'Short' if you think the price will go down. If it does go down the dealer pays you the difference in value. If the price goes up, you pay the dealer.
You can go 'Long' if you think the price will go up. If it does go up the dealer pays you. If the price goes down, you pay the dealer.
Male vs Female Day Traders' Trading Style
Stereotypes are dangerous, but if they are based on facts they can give us a partial guide as to what to expect from men and women who trade stocks.
Men are impulsive, never ask for advice until things go wrong, and even then they ignore any advice they are given.
Women ask for help, overdo the research, and miss opportunities through hesitation.
Neither stereotype makes for the perfect day trader, but female traders generally do slightly better than male traders with similar experience. Male traders may refuse to recognise mistakes and lose money when they should have sold at a small loss. Female traders might miss out on profits by waiting too long and spending too long on research while waiting for the perfect moment to buy.
Which strategy sounds better?
Who would have thought it? Men mess things up by rushing in where women fear to tread.
Reasons Day Trading Might Suit You
You can start small. Your first trade might be for $200, with a maximum loss of $25. You can even start for free if you open a demo account where you trade with pretend dollars. A demo account is a great idea when you start because every trader loses money at the start, and you don't want to lose real money if you can avoid it.
If you can monitor stock prices during the trading day, you will spot more opportunities to makes money. Ideally, you need to be able to monitor your contracts all the time they are open. If you can't do that, you can still reduce the chance of a trade going badly by using stop-loss and take-profit positions.
Does day trading sound too risky for you? There are risks, but you can mitigate them by following sensible strategies. There will always be some risk, but a good trading platform will ask you how much you are willing to lose when you take out a contract. You cannot lose more than that amount.
As a beginner, you will want to reduce your risk to the minimum.
1. Research, research, research.
2. Start with a demo account
3. Start small
4. Plan your trades
5. Decide your stop-loss position – the price you will sell at if you are losing money
6. Decide in advance your take-profit position – the price you will sell at if you are making a profit
Follow these six simple rules to make your day trading successful.
image by Sergei Tokmakov Terms.Law from Pixabay