» Day trading has become an online phenomenon in the last year which has resulted in manuals and courses on how to successfully day trade. Day trading is the buying and selling of a stock on the same day hoping to make profit from any small increments in price.

» Brokerage houses offer 2 month seminars on how to day trade, such courses costing a few thousand dollars.

» While day trading has become popular, the characterizing of day trading as another mode of investing may be overstated. Day trading is tantamount to gambling and some brokerage houses have been guilty of overstating day trading as safe and risk-free. For the sophisticated investor day trading may be safe since such investors know what they are doing and are willing to absorb the risk of losing money.
» Novice investors do not know what they are doing and brokerage houses' misleading claims of quick money, low risk and promises of early retirement, can lead novice investors down the road to losing life savings.

Before engaging in day trading, keep the following in mind:

» Day traders usually buy and sell on stock price momentum usually disregarding the fundamentals of the underlying stock company. The inherent risk in this, is that the day trader is hoping that his stock will rise without knowing whether the price should be rising based on the quality of the underlying company.

» It takes tremendous discipline to be a day trader. Discipline to sell a stock that is rising and more important discipline to sell a stock when it is falling. Day traders will set limits of when to sell a falling or rising stock. Selling a stock that has lost money is difficult because typical investors want to hang on hoping that the stock will rebound. As the price continues to fall, the desire to hang on gets stronger and stronger, until a great deal of money has been lost. If you can't set and stick by predetermined selling points, day trading is not for you.

» Your expectations of day trading must be realistic. A day trader must be realistic about the amount of work, discipline, tolerance to risk and luck that is needed to be successful.

» Be aware that day trading does not offer the protection of an advisor who can tell you whether a particular investment is suitable to your financial goals. An advisor has the obligation to tell you whether an investment appropriate to you income, goals and age. This safeguard does not exist in day trading where you are on your own since day trading usually involves the use of a discount broker which offers no advice.

» Some investors can become addicted to day trading. Day trading can be a form of gambling and any individual who is prone to a gambling addiction could be in for a long, expensive ride.

» Only invest money that you can afford to lose. Day traders usually set the goal of buying and selling the same stock in a day. The loss could be incremental but over time, such incremental losses and trading commissions could add up before you know that you have lost a considerable amount of money. Consequently, only invest with money you are prepared to lose and set a limit of how much you are willing to lose.