Day trading is buying and selling financial assets such as currencies, stocks or commodities, which occurs in one day. It has long been a part-time employment option for students and people looking for extra work, but what about those that have retired? In theory, a retired person with more time on their hands might be well placed to try day trading. But is that really the case? This article will look at the pros and cons of day trading and whether this activity is suitable for retirees.
Not all retirees have a decent nest egg that will see them through their old age, while some have been forced to retire because of their age or health. If you are no longer working and wondering if day trading is a viable option for you, read on.
Table of Contents
You Will Need to Learn
Day trading can have a steep learning curve, and takes time to become familiar with the basics. You will have to learn about technical and fundamental analysis, what causes price movements, and research the markets you’re interested in before before investing. It also helps to trade firstly with a demo account, provided by many brokers, which essentially let you use pretend money in real market conditions.
There is a learning curve to this activity that many retirees may look at as a way to pass the time. But, unless you are willing to learn something new, you probably won’t enjoy it. There is also a substantial investment amount needed to make day trading viable. Some retirees may not want to spend their savings on something like this. You must only trade with fund you can afford to lose, and already be secure in terms of your finances such as pension income.
It’s Risky
Day trading can be a potential option if you are looking to expand your financial portfolio. Keep in mind that it’s a risky business to undertake, however. It may be a way to pass the time and invest your hard-earned cash, but don’t put all your eggs into one basket. The benefit of day trading is that at the end of the day, you’ll know whether you made money or lost it. It isn’t much of a waiting game, but you need to make sure you can afford to lose your investment.
Although you might hit a stroke of luck and make a few extra dollars, stocks will go up and down constantly throughout the day. Do the necessary research into platforms with robust risk management, which will help you keep a close eye on your investments.
It’s Stressful
When a person retires, the idea is to relax after working a full career. It’s a time to reflect on your life and enjoy the fruits of your labour. There is a major element of stress to day trading, and if you aren’t up to working hard again, don’t go through with this endeavour. Throughout each day you might experience both excitement at money being made, but also emotional and physical stress if one day doesn’t go well. More than three-quarters of day traders quit after two years because of the constant rollercoaster ride of emotions the job brings.
Conclusion
Day trading can be profitable for some, but it’s important to remember that it can take months to become good at it. There will also be times that the market won’t react the way you hoped, and all your hard work goes out the window. Therefore, day trading is only a suitable option for a small proportion of retirees. If you have the time, available funds and right mindset, it might be a something worth looking at. Otherwise, medium term investments rather than short term could be more appropriate.