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How to Become a Day Trader in 5 Simple Steps

If you’re looking for a lucrative gig that has the potential to offer competitive pay and flexible work hours, then day trading might just be for you.

It’s a great way to start your entrepreneurial journey and make loads of money. And the best part about day trading is that it involves a lower amount of capital to start with.

However, beneath the allure of potential profits lies a complex landscape. Whether you choose to day trade part-time or go all in full-time, day trading comes with a high degree of risk and uncertainty.

Don’t worry, though! We’ve got you covered. Follow our comprehensive guide to learn what a day trading career entails and how to become a day trader.

An Overview of Day Trading: A Primer

Day trading is the act of buying and selling securities and stocks on the same trading day or within a short time frame with the goal of making profits. 

Day traders capitalize on short-term price fluctuations in the market, seeking opportunities to enter and exit trades quickly. They carefully monitor the market and make informed decisions.

Here are some basic duties of a day trader on a daily basis:

  • Tracking and monitoring daily market trends
  • Analyzing price movements for potential trading opportunities
  • Executing trades that have a quick turnaround
  • Staying informed about news and events that may impact the market
  • Buying stocks that might perform well
  • Selling stocks with the intention of profiting

Related: How to Start a Business With No Money

How Much Do Day Traders Make?

As a day trader, you can trade for yourself and control the profits alone or work for a trading entity and trade on their behalf. Day traders who trade on behalf of a hedge fund or an investment bank are typically salaried.

As reported by Zippia, a day trader earns about $116,895 per year on average, which is equivalent to $56 per hour. The data indicates that the top 10% of day traders in the United States earn over $198,000 a year. 

What You’ll Need to Become a Day Trader [& Associated Costs]

Day trading can be a great way to make money, but it’s also a way to lose money!

Every business needs a plan, which, in this case, includes knowing what you’ll trade, how you’ll invest, and how you’ll protect your trading profits.

Keep the following things in mind before opening a trading account:

  • Experience and Knowledge: Day trading can be a lucrative career if you’re experienced and educated enough to treat it as a business. You must have some knowledge of the stock market and trading world, and a good idea of your capital, risk tolerance, and goals.
  • The PDT Rule: The pattern day trader (PDT) rule states that you must have at least $25,000 to continue day trading. Under this rule, you can only execute up to three trades within five business days. If you’re a new trader with less than $25,000 in your trading account, then this rule applies to you.
  • Find a Place to Work: If not an entire room, you can find a suitable corner or hallway to put a desk and a computer to start day trading. Faster processing speeds and more memory will help. Spend money on a big flat-screen monitor to see charts and data at the same time. Also, you need as much bandwidth as possible.
  • Day Trading Software: One of the important tools of successful day traders is day trading software. Reliable trading software will help you find specific stocks to trade quickly and efficiently. There are all types of software for charting, online brokering, and scanning to make day trading easy. 

How Much Does It Cost to Become a Day Trader?

Legally, you must have at least $25,000 in your trading account before you start day trading, according to the PDT rule. If you want to trade more than three times a week, you need to maintain that minimum balance.

Now, many brokers don’t have a limit on minimum deposit, which means you can start day trading with as little as $10. For example, in the US, companies like Schwab and Robinhood don’t have any limit on minimum deposits, which is great for new traders.

Is It Hard to Become a Day Trader?

For many people who try to make it a career, the answer is no.

Often, the key to successful trading isn’t just about purchase and sale prices, but also how the entries and exits are managed.

There are many things you need to consider to make profits from day trading. Here are some key skills required to master day trading:

  • Analytical and research skills
  • Attention to detail
  • Patience and adaptability
  • Risk management
  • Ability to work under pressure

How Long Does It Take to Become a Day Trader?

You must have heard numerous day-trading success stories, but the reality is that most people fail at it.

Becoming a successful day trader can take years. It requires time and patience. Often, the best thing to do is sit tight and wait for the right opportunity.

Depending on what kind of trading you choose, it can take a few months to a couple of years. You could leverage multiple trading strategies to reduce your risk and have multiple sources of income.

How to Become a Day Trader in 5 Simple Steps

Getting started with day trading is a big decision; one that can change your life!

Success in any business requires a clear roadmap and the discipline to follow the instructions. So, here are some basic steps you can follow to start your journey as a day trader:

Step 1: Get a Degree and Gain Experience

While you don’t need a specific degree to pursue day trading, getting the right degree will give you a head start and prevent any obstacles down the road. A degree in finance, economics, or accounting will help you stand out in a competitive job market.

The trading game is seriously competitive. You could take additional trading courses or seek internships in a day trading firm to gain some valuable experience.

This will help you gain essential skills and knowledge for the job going forward.

Step 2: Open a Brokerage Account

To start day trading, you’ll need to open a brokerage trading account. Brokers are individuals or firms who are paid to execute trades on behalf of their clients.

They have access to market trends and data on stocks’ performances to learn how the stock price is doing.

A broker will help you understand the market better by offering a trading platform that keeps you updated with real-time market data, such as stock movement charts, direct order routing, etc.

Pattern day traders should maintain at least $25,000 in their trading account.

Step 3: Develop a Suitable Trading Strategy

Not all day traders follow the same approach. Some focus on just one investment vehicle, while others deal in multiple trading markets.

Day trading involves many strategies, such as scalping, momentum, or swing trading. Choose the style that best fits your personality, risk tolerance, and available time.

You can start with one or two day trading strategies in the beginning, and then move on to more as you gain experience. Because the trading market is highly volatile, it’s important to review your trading strategy regularly.

Step 4: Practice with a Demo Account

Before you risk your personal investment, it’s a good idea to try out potential trading strategies with a demo account. Many brokerage firms allow you to carry out real-time trading without using real money.

A demo account is an excellent way to practice day trading without the risk involved. It provides a great opportunity for you to learn the ropes and get a sense of how the market works.

Also, it allows you to choose the capital you’d like to simulate trading with.

Step 5: Start Small and Then Expand

Even if you’ve got sufficient capital and experience, putting a lot of money on the table at the beginning can be risky.

Don’t play big on the first trades and always start with a small amount that you can afford to lose without any significant financial consequences.

The stakes aren’t just financial; you’re committing your valuable time and money, which is worth something. Figure out how to use them effectively.

Since losing money is also part of the learning process, it’s a wise move to start slowly and then increase the stakes.

Reasons to Consider Becoming a Day Trader

While there are risks associated with day trading, there are many reasons why it could be a viable career path.

Here are some reasons to consider becoming a day trader: 

  • Trade from anywhere: Day trading provides a lot of flexibility. You can choose your place of work and determine your own time schedule. You can make money on a daily basis working remotely doing what you love.
  • Choose your own clients: As an independent worker, you can choose your own clients. You get to be your own boss with no one telling you what to do. 
  • High earning potential: Day trading offers high income potential and most traders make lots of money daily. If you’re really good at it, you could earn more working for a trading or investment firm.
  • Tons of opportunities: Day trading offers a lot of exciting opportunities and provides access to a market where you can trade a wide variety of financial instruments using all kinds of strategies every day.

Frequently Asked Questions

What is the difference between day trading and investing?

Investing is a process of putting money at risk for returns and it’s focused on the long term, while day trading moves fast and is focused on short-term price fluctuations for money.

What is the best time to day trade?

Regular trading starts at 9:30 AM ET, so a significant movement is expected around 10:30 AM, which is an hour after the market opens. This period is often the best hour of the day to start trading.

Similar Gigs to Check Out

If you’re looking for other opportunities but don’t like day trading, check out the following alternatives: 

  • Become a Life Coach: If you’re passionate about helping people and have excellent problem-solving skills, you could become a life coach and make money.
  • Become a Brand Ambassador: Don’t like the risks involved in dealing with day trading stocks? Well, if you’re looking for a steady source of income without the stress, you could become a brand ambassador.
  • Become a Consultant: If you like to make money by sharing your expertise and working with a lot of people, you could start your career as a consultant.

Wrapping Up

Day trading can be tough, but once you’ve realized that it’s the right career path for you, it leaves you with exciting new ways to get started.

Hopefully, our guide will help you make smart, informed decisions and set you on the right path to becoming a day trader.

If you find this article helpful, share your thoughts in the comments section below. Please feel free to share it with others who might be interested in day trading.

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