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Is Day Trading a Good Side Hustle?

Day trading can be an appealing side hustle for those interested in the stock market, but it’s not for everyone. It can generate quick profits, but it also carries significant risks. Here’s what you need to know.
Is day trading a good side hustle?
Is Day Trading a Good Side Hustle?
Is day trading a good side hustle? Let’s find out in this blog. 

Looking for a part-time job that offers a high return? Day trading could be your answer! It’s not just about dog walking or driving for rideshare anymore. Thanks to online platforms, day trading is now accessible. More and more people are seeking to earn additional funds.

Day trading quickly gained popularity as a side job. According to Charles Schwab’s research, American stock traders rose from 15% in 2019 to 25% in 2021. However, it involves large amounts of risk. If you develop an appropriate approach and tactics, engaging in it part-time and making a profit is feasible. This article deals with day trading as a passive side business. Is day trading a good side hustle? Let’s find out. 

Is Day Trading a Side Hustle? An Overview

Day trading involves the selling of securities and their purchase on the same day. They don’t keep any positions open until the markets close for the day. Successful day trading requires some knowledge about market analysis, technical analysis of charts, and when to take losses. It’s a risky activity with more returns. Traders should be ready for potential losses.

Benefits of Day Trading as a Side Hustle

Here are some of the top benefits of day trading as a side hustle:

1. Potential for High Returns

Day trading also allows you to make lots of money quickly, which is why it’s such a popular part-time job. Due to time constraints, skilled traders who focus on tiny price fluctuations and frequently trade can make more money than in normal employment.

2. Flexibility

Day trading also offers flexibility. Traders can work from anywhere with the internet, and they can fit trading around full-time jobs, making it perfect for those wanting extra income without set hours.

3. No Physical Inventory

Traders don’t need to manage products or stock. They focus on financial assets only, which reduces business costs and challenges.

Challenges and Risks of Day Trading

Here are some challenges and risks of day trading that you must know before getting into this side hustle:

High Volatility

Day trading often involves quick price changes, which can result in big losses. Market unpredictability, especially in unstable sectors, complicates consistent profit.

Time-Intensive

Day trading needs constant market watching, often requiring hours daily. Managing this alongside a permanent job or other engagements may be difficult and exhausting.

High Transaction Costs

Day trading involves many trades, leading to high transaction fees. These costs can cut into profits, making it hard to stay profitable.

Getting Started: How Much Capital Do You Need?

The required amount to start day trading varies by trade type and platform. For stocks, the SEC requires $25,000 for frequent trading. However, starting trading forex or crypto through brokers who require as little as $100 is possible. It is advisable to trade with money you can afford to lose, as day trading is inherently dangerous.

Essential Tools and Platforms for Day Traders

Day traders rely on technology for success. Their key tools are:

Trading Platform

A good platform is crucial for buying and selling. Top platforms are easy to use and offer real-time data and advanced charts.

Charting Software

This software aids in analyzing price movements and trends. It features important indicators and customizable charts for quick decisions.

Stock Screener

This tool filters stocks by criteria like price and volume. It helps traders find stocks that match their strategies.

Strategies for Successful Day Trading

Day trading needs a solid strategy. Popular ones include:

  • Scalping: This involves daily small trades to profit from minor price changes. Success requires quick decisions and market trend awareness.
  • Momentum Trading: Here, traders buy stocks based on recent price trends. They bet that these trends will continue. Early recognition of market strength is key.
  • Risk Management Strategy: Successful traders set strict loss limits. They use stop-loss orders and limit trade amounts to keep losses manageable.

Balancing Day Trading with a Full-Time Job

For full-time workers, day trading requires careful planning. First, find times to check the markets. Due to increased activity, many traders focus on the market’s opening and closing hours. Second, pick a strategy that doesn’t require constant attention. Swing trading, for example, lets you hold positions for days.

Time management is crucial. Set aside specific hours for research and analysis so that trading doesn’t interfere with your main job.

Tax on Day Trading Earnings

In the US, day trading profits are subject to taxation as short-term capital gain. The taxation rate applies to the overall earnings, which may amount to close to 37 percent depending on the level occupied as income. Besides, those who make several trades can be categorized as ‘traders in securities’ within the IRS office. This status allows for different tax rules but adds complexity. Therefore, it’s crucial to consult a tax professional.

How to Maximize Day Trading Income

Maximizing day trading income needs discipline, strategy, and learning. Traders should:

  1. Build a Strategy: A solid plan is crucial. Use methods like trend-following or breakouts to spot opportunities and cut losses.
  2. Keep Learning: Stay informed about market trends and techniques. This boosts decision-making and profits.
  3. Manage Risk: Use tools like stop-loss orders to limit losses. Set risk-reward ratios to avoid emotional trading.
  4. Diversify: Spread investments across different assets to lower risk. This approach balances portfolios and boosts profit chances.

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Conclusion

Is day trading a good side hustle? Probably, but there are risks. If you can devote your time and take the necessary steps, day trading could be a good source of additional income. Yet, it’s vital to understand the challenges. Always trade carefully, using smart strategies and managing risks.

Beem Everdraft can help traders with cash flow. Beem will help you plan your budget, send and receive money, calculate taxes, take out personal loans, and many more tasks. This makes it easier to handle the ups and downs of day trading. Download the app here!

FAQs for Is Day Trading a Good Side Hustle

How much can you realistically make from day trading?

Day trading income depends on experience, capital, and strategy. Beginners might see small returns. In contrast, skilled traders with more capital can earn thousands daily. However, losses are common. So, managing risk is crucial.

What are the biggest risks of day trading?

Day trading also comes with risks. It includes losing all your money, emotional trading, high market swings, and high fees from frequent trades. Without good risk management, day traders can quickly lose their profits.

Can you day trade while working a full-time job?

Yes, many people day trade while working full-time. However, it needs careful time management, automated tools, and low-maintenance strategies. Importantly, day trading shouldn’t interfere with your main job.

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Author

Picture of Rachael Richard

Rachael Richard

Chatty yet introverted, Rachael is constantly looking for the next big thing to write about. A research scholar, passionate classical dancer and someone who enjoys humming a few tunes, when she's not generating content ideas, she is busy imparting wisdom as a teacher.

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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