Last time, I talked about my goal to day trade for a living; now let’s talk about what might really be required of someone who is day trading for a living.
First of all you need capital. You can paper trade all day, but unless you’ve actually got money invested in the market, you can’t very well make a living at it can you? If you’re day trading for a living, you’re going to be buying and selling stocks all day, and this is going to require quite a bit of capital. If you’re day trading full-time you’re going to be classified as a pattern day trader and the SEC has imposed a rule that requires you to have at least $25,000 in capital. In reality you’re going to need a bit more than that because if you fall below that level, your account will be frozen. There are a vast range of opinions on the minimum amount required to succeed as full time day trader. They start as low as $30,000 and go on up half a million dollars. Before I go full time, I’d like to have at least 50k, but I have a few years studying and playing the markets part-time with moderate success. That success only came after some big failures though, and believe me, as a new full time day trader, you’re going lose money trading. You have to be prepared for that. Which brings me to my next point.
If you plan on day trading for a living, you’re going to have to get used to losing money. There are ways you can mitigate the damage though, especially when you’re just starting out. If you’re new to the markets, it’s easy to get caught up in the speed and potential to make a lot of money day trading, but you have to try to suppress that and start slowly. You should being trading with just 1 stock. That’s right, 1 stock. Not 1 company’s stock; 1 single stock in a position. If your broker doesn’t allow this, maybe bump this to 10. If your broker doesn’t allow you to trade 10 stocks, get a new broker. This method let you ease into the reality of day trading for a living using real money that a day trading simulation will never replicate. This may seem costly at first, due to brokerage fees for each trade, but it’s a lot less costly than starting out with a larger position size, and losing every trade before you figure out what the hell’s going on. Day trading for a living is a great way to make money, but you have to walk before you run. And before you walk you need to crawl around trading 1 stock.
When you’re day trading for a living you have to have patience. You have to have an eye for the big picture. Yes, you’re trading 1 stock now, and probably losing money whether the trade is good or bad. But when you start increasing your wins in both quality and quantity you can increase your size and the money will follow. If you can hold onto a stock for a full point of movement, imagine if you held position of 100 or 1000 on that same trade. You just made 1000 bucks day trading. Congratulations. Conversely, you need to understand that losses happen. You can have a down day or even a down week, but you have to give yourself and the market the chance to turn things around. You can make up for a bad week in one trade. I’ve seen it happen; I’ve made it happen. The trick, when you’re day trading for a living, is having the patience to stick with it through the bad times as well as the good. Try to not let the pressure of providing income affect your solid judgement.
Day trading for a living can be one of the most stressful ways to earn income. Using the simple tips above can help your learning process and ease you into the reality of becoming a full time day trader.
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