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How To Get Started In Day Trading

Trading is a tough job, but definitely has its perks. It doesn’t require any special education, and nearly all traders are self-taught or learn from others through research or mentoring. What many people don’t know is that you can earn a living using very little of your own money, and in some cases none of your own money. There are day trading “jobs” where you work for a firm and they provide you with capital, or you can trade for yourself and start out that way. There are options, depending on what you want and need to succeed.

Here we look at some of the ways to get started in day trading.

How to Get Started in Day Trading – Anyone Can Do It

Most want-to-be-traders are under the false impression that they need lots of money or certain connections to become a day trader. That’s not the case. There are lots of options for want-to-be-day-traders that require very little capital. If you go at it completely alone, then yes, you will need some capital to fund your trading and pay your bills, but trading alone isn’t the only option. Low-capital options include trading for a firm, or trading forex on your own. We will discuss these options in more detail later on.

Day trading has a certain allure to it. Making trades and walking away at the end of the day, with hopefully some money in your pocket (and possibly more money than most jobs), is a good feeling.

You may be wondering if day trading is a viable career choice? It is not easy, but it is also not gambling. If you control your risk and follow a proven plan, then the odds are in your favor. That said, most traders lose money because they fail to control risk or don’t have a tested and proven trading plan, or they don’t follow it.

So let’s look at the options available to those who want to start day trading, or who are looking for a way to progress their day trading career.

Proprietary Trading Firms

There are many proprietary day trading firms all around the world that hire and train people to become profitable traders. Each firm is different; some require no capital from the trader and others require a deposit. Some firms require no prior trading experience (and even prefer it that way), although it is common to have to go through several interviews which address how you psychologically respond to stressful situations, how well you can follow rules, and how you balance aggression with logic and patience.

The process starts by simply sending a company your resume with your current background, no matter what it is, highlighting your entrepreneurial spirit and ability to work under pressure. Some countries have licensing requirements, while others do not. A firm may sponsor you to get the required licenses or they may require you get them on your own. The process for passing the necessary examinations or interview process is not an obstacle for most ambitious people who are eager and humble enough to learn.

Once hired, the firm will provide you with capital, or leverage the capital you provided, to trade a particular market. Training is generally provided and the extent of what they teach varies greatly by firm. Some firms will push you to trade a proven method, while others encourage the trader to develop their own methods.

The firm will often take a percentage of your profits and generally there are small fees associated with each trade. Each firm will have their own balance of fees and profit payouts. Low fees will often mean the trader gives up a higher percentage of their profits, and high fees will mean a lower percentage of your profits is filtered to the company.

The percentage of profits the trader is paid generally ranges from 50% to 100%.  Remember though, there is always a trade-off. High fees can make it hard to make a profit, and 100% of nothing is $0. So in some cases, a 50% payout of a small profit, due to lower fees, is more favorable. It is important to consider whether your own money is at stake, or just the firm’s capital. If the firm is risking their capital generally payouts will be lower, or fees higher, or some combination of the two.

Most firms do not hire you as an employee. Rather, you are contracted and have your own business under the organization. This allows you to write-off business expenses (consult the documentation and your own tax advisor). Some firms allow you to trade from home and some will require you be in the physical office.

If you want to start trading, it is something to look into. There are day trading firms in almost every major city throughout the world.

LeverageAcademy has a list of proprietary trading firms. If you don’t find one on the list that caters to traders in your area, do a Google search for your current city and “proprietary trading firms,” or search for proprietary trading firms that allow you to trade remotely from anywhere in the world.

Start Day Trading On Your Own

Going at it alone is a tough but rewarding journey. You are in full control of everything you do, the fees you pay, how much you make/lose, your strategies, and when you work. Full control means full responsibility; you alone determine your success, even if using an automated trading system. There is a definitely a lot to learn, but you keep all the money you make. The downside is that you need to fund your trading and education (or educate yourself). If you dedicate yourself to day trading, practicing strategies every day, it will likely take six months or more before you start to see consistent income.

I recommend you assume it will take at least a year before you become consistent enough to draw an income from your day trading. This means you will need to fund your trading account and also have money to pay your bills. While you are learning to trade and gaining consistency, you may wish to have a part-time job to ease the financial pressure.

If you are a very social person, trading from home, by yourself, could be torture. Yet there are always chat rooms or social media discussions for traders if you need some social engagement. If you have some friends who trade, you can also strap on headsets and chat with each other while you trade, recreating a trading floor feeling. If you like being on your own or dislike rush-hour traffic, then day trading from home is a great option.

As a general guideline, to start day trading stocks you should have at least $30,000. Stocks are the most expensive market to get started in. To start day trading forex, $3,000 is recommended, but you can start with as little as $500. Keep in mind, the smaller amount you deposit the smaller your income will be initially. For futures, trading a product like the S&P 500 Eminis, start with at least $7,000. See How Much Capital to Day Trade for a breakdown.

Steps to Day Trading Success

If you get hired by a firm, they will likely offer some assistance and learning resources to you. Even if they don’t, and they want you to come up with your own methods, ask the successful traders at the firm for guidance. Utilize these resource.

If you start day trading on your own, the amount of information and misinformation is overwhelming. In a way, it is also a bottomless pit. You could spend the rest of your life reading trading articles and books and watching finance channels on YouTube and you still wouldn’t get through it all.

To limit the information, limit how much you absorb on various topics. 

  1. First, pick a market you will trade. Do a bit of research on stocks, forex, and futures and the differences between the markets from a day trading perspective. Spend maybe a day or two on this question. Then make your decision. Consider things like capital requirements, when you can trade, personal interest.
  2. Next, research risk control. Your ability to manage losses, and avoid big hits, will ultimately determine your success.
  3. Read articles or a book on technical analysis. This is to acquaint you with the ideas of trends, reversals, support and resistance, and chart patterns. All these things will aid in determining when to take trades and when not to, since many strategies center around these concepts in one form or another.
  4. Open a demo trading account and get used to various order types. Just play around and watch how the market moves. Notice the technical analysis concepts at work.
  5. With knowledge of order types and how prices move, begin looking at strategies. A strategy must outline how you get into and out of trades (profit and loss). When starting out, I recommend focusing on a trend-following strategy, a reversal strategy, and a chart pattern strategy. As you progress you can add more strategies or changes some variables to produces more trades, but two or three strategies will provide enough trades to start with.

Successful traders typically find a few methods that resonate with them and then they MAKE THEM WORK. For example, maybe you read my trend-following strategy article, but you try to use it and it doesn’t seem to work. Maybe we don’t see the market in the same way. That is okay. BUT, you may still like the idea of strategy and the concept behind it. In that case, your goal now is to find ways to tweak that strategy so it works for you and your personality. Maybe I trade 1-minute chart, but you prefer a 5-minute chart. Put in the work to make it work for you. This is the trader’s job. I have lots of strategies, and they perform much better on some days than others, but I make them work by realizing the market is always changing. No two trading days are ever exactly alike. Strategies need to adapt to changing conditions and so do we.

  • Once you have some basic trading strategy ideas, practice in a demo account until you start to develop your own trading style and feel confident in your abilities. Once consistently profitable in the demo account, then consider opening a real-money account with a broker.
  • Choose a day trading broker with fast execution and lows fees. High fees or a broker that is slow to execute orders will cause a lot pain to a day trader.

Day Traders, Manage Your Expectations

Regardless of whether you decide to trade on your own, or trade with a firm, don’t go into it expecting to become rich. Trading offers a lifestyle. Very few traders become rich…at least not overnight (see Why Day Traders Make Big Returns But Aren’t Millionaires). Trading offers a way to make a living while having loads of free time to do things you enjoy, spend time with family and friends, travel, and not have to answer to a boss or go to a job you hate every day. Don’t underestimate these perks, as they are what create quality of life.

Gaining consistency and making money will take time. If money is your only goal for trading, you will likely burn out before the money shows up. Trade because you like it and want to do it.

If day trading or swing trading forex appeals to you, and you wish to do it on your own, check out my Forex Strategies Guide for Day and Swing Traders eBook

Alternatives to Day Trading – Swing Trading and Investing

Day trading requires that you are able to sit at your computer and trade for at least a couple hours a day. If this isn’t an option for you, then you may want to consider swing trading or investing as these are less time-intensive options. Swing trading stocks, forex, or futures are all viable. As is investing in forex or stocks.

It is possible to actually day trade, swing trade, and invest. For example, day trade in the morning. Look for swing trading opportunities toward the end of the trading session or after the close (find trades for next day), and then also do some research once or twice a month to find stocks that are trading at bargain prices for long-term holds.

When starting out, focus on trading just one of these time frames, in one market. As you start to see consistency, only then consider adding in other time frames or markets.

By: Cory Mitchell, CMT

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