A decline in the value of the securities that are purchased may require additional funds be paid to the firm to avoid the forced sale of those securities or other securities in an investor's account. Short selling as part of a day trading strategy also may lead to extraordinary losses, because stock may have to be purchased at a very high price in order to cover a short position. Customers should be cautious of claims of large profits from day trading. Customers need to be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires knowledge of securities markets.
Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, an investor must compete with professional, licensed traders employed by securities firms. An investor should have appropriate experience before engaging in day trading. If you plan to borrow money to buy a stock, you also need to know the terms of the loan your broker gave you. This is called margin.