How to Start a Career in Day Trading

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Start a Career in Day Trading
Start a Career in Day Trading (Image: Bundesarchiv (CC-By-SA 3.0))

The challenging aspect of any kind of investing is timing the market. But this is exactly what the day trader endeavors to master--rather than investing, day traders step in to buy and sell stocks all within a matter of hours or minutes. They are the stock market equivalent of house flippers. Whereas long-term investors can place orders and leave their positions untouched for weeks, months or years, a day trader must be ever vigilant for opportunities. Starting a career in day trading is time consuming and stressful, and not for everyone.

Things You'll Need

  • Funded trading account
  • Computer

Get educated. The notion that knowledge is power absolutely applies to day trading. Long before the first trade is ever made, most traders spend years gaining formal and informal education on markets, the economy and trading instruments. In addition to the wide array of books and television shows available, there are also many trade school programs that train individuals on the finer details of finding and executing short-term trades.

Practice with a simulator. No beginning trader is ever as good as he thinks he is, and even the most experienced traders will test new strategies in simulators and with back-testing. Also called paper-trading, a simulator allows a trader to make imaginary trades and track the performance. Though nothing exactly simulates the stress of having real money on the line, simulators are among the best ways to gain experience.

Open a trading account. No trader should ever use funds they need for short-term bills or expenses. In fact, they shouldn't put any money in their trading account they can't afford to lose. This one simple form of discipline can prevent life-changing disasters and help a trader maintain an even and objective view towards their trades. The SEC requires a minimum account equity of $25,000 for pattern day traders.

Manage risk. Cash is the lifeblood of the trader, and there's nothing so catastrophic as losing huge amounts of cash--even if it's money you can afford to lose. With no cash, no trades can be made, so one of the most important activities of a trader, especially a beginner, is managing risk and limiting losses through the use of stop losses and options.

Network. The market is huge and there are more factors involved each day than any one trader can know. There are also so many markets that one person simply can't watch them all. Successful day traders, then, tend to network and develop relationships with other traders with whom they can share information and discuss strategy. A day trader's network, in fact, is usually a major part of their initial and ongoing education.

Tips & Warnings

  • Day trading revolves largely around technical analysis and relative objective indicators. Techniques such as these that allow the trader to remove emotions and remain objective tend to be a crucial part of sustained success.
  • All trading is inherently risky, but no approach more so than day trading.

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