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Yes, you can hire someone to day trade for you, but there are some important considerations to keep in mind before doing so.
Firstly, it’s important to understand that day trading can be a high-risk activity, and not all traders will be successful. Therefore, it’s important to find someone with a proven track record of success, ideally with a reputable and established trading firm. Day trading is considered a high-risk activity for several reasons:
- Volatility: Day traders buy and sell securities within a single trading day, which means they are exposed to significant price volatility. The prices of stocks, futures, currencies, and other assets can change rapidly and unpredictably within a short time frame, which can lead to substantial gains or losses.
- Margin trading: Many day traders use margin trading, which allows them to borrow money to increase their buying power. While this can increase potential profits, it also increases the risk of substantial losses, since losses will be magnified.
- High competition: The day trading industry is highly competitive, and successful day traders need to be highly skilled and disciplined to consistently make profits. The competition can be intense, and even experienced traders can make mistakes that can lead to significant losses.
- Emotional factors: Day trading can be an emotional rollercoaster, as traders need to make quick decisions under pressure. Fear, greed, and other emotional factors can cloud judgment and lead to impulsive trades that may not be based on a sound investment strategy.
Overall, the combination of volatility, margin trading, competition, and emotional factors can make day trading a high-risk activity. While it can be profitable for some traders, it’s important to understand the risks and be prepared to manage them effectively.
Secondly, it’s important to consider the cost of hiring a professional day trader. Typically, day traders charge fees or commissions based on a percentage of the profits they generate. These fees can be substantial, and may significantly eat into your returns. For example, let’s say you hire a day trader who charges a 10% commission on profits. You invest $100,000 with them, and they generate a return of 20% over the course of a year, resulting in a profit of $20,000. With the 10% commission fee, the day trader would keep $2,000 (10% of the $20,000 profit), leaving you with $18,000 in net profits. This means that the day trader’s commission has reduced your return from 20% to 18%.
Over time, the impact of the commission fee can compound and significantly reduce your returns. For example, if you were to continue investing with the same day trader and generating a 20% annual return with a 10% commission fee, your returns after 10 years would be about 4.4% per year, which is substantially lower than the 20% return you earned before the commission fee. Therefore, it’s important to carefully consider the impact of fees and commissions when hiring a day trader or any investment professional. You’ll want to make sure that any fees charged are reasonable and that the potential returns justify the cost.
Thirdly, you’ll need to determine how involved you want to be in the day trading process. Some traders will want to have full control over their investments and make their own trading decisions, while others may prefer to delegate the decision-making process to their hired trader.
Overall, hiring a day trader can be a viable option for some investors, but it’s important to do your due diligence and carefully consider the costs and risks involved before making a decision.