Trying to save up for a nice vacation away? Trying to save up for a nice vacation away? Or have you been comparing different types of retirement accounts in hopes of opening an IRA? Whatever the reason, day trading is the perfect way to earn some extra cash to do so. Learn how it can be right for you here! Day trading is the perfect way to earn some extra cash to do so. Learn how it can be right for you here!
So you’ve heard about how successful day trading can be and you want to know how to get your own piece of the pie?
Day trading isn’t easy, but you can make a living from it. Plenty of dedicated people do. To get you started, I’ve put together everything you need to know to earn some extra money. Let’s start with the ‘day trading for dummies’ basics: what is day trading?
What Is Day Trading?
Put simply, day trading is the act of buying and selling stocks and other commodities over the course of a day. Unlike traditional investing, day trading is all about quick sales.
With traditional investing, you buy stock and own it for months or years at a time before you sell. With day trading, you own the stock for hours or even minutes. It’s a method that can make you a decent living if you know what you’re doing.
How Can You Earn Money Through Day Trading?
Let’s say I buy 5,000 stock in a company for $0.01 each. I’ve spent $50 dollars. Now let’s say that stock goes up by $0.04 within the next hour. I sell my stock immediately and earn my profit right away (in this case, $200).
This is just an example, but it reflects the quick turn-around in selling through day trading. These traders understand the patterns of the market. Because of this, they’re able to make informed decisions on what stocks to buy in bulk. And they know when to sell them to see a fast return on their investment.
Just remember that day trading is not about making a huge amount of money selling a few stocks. It’s about buying low-cost stocks in bulk and earning small profits when you sell. And then repeating that process over and over.
5 Steps to Getting Started
So, are you ready and eager to dive in? Here are five things you need to think about to get started as a day trader.
1. Determine Your Commitment Level
Day trading is not a hobby for the under-committed. In fact, I would argue that it’s not a hobby at all. In order to be successful as a day trader, you’ve got to commit to it.
It’s easy to think that if I just go in and do some trades here and there, I’ll still make money. I mean, if that’s been my approach to investing in general, can’t I do the same thing with day trading?
No, I can’t (and neither can you). Day trading necessitates focus. You have to keep on top of market trends, know the patterns, and be sharp with your decision making.
Day trading isn’t like investing, where you can buy some stocks and let them sit for a while. It’s
2. Understand the Requirements
First, there are financial requirements to being a day trader. FIRNA is the Financial Industry Regulatory Authority. At times, they maintained that day traders must keep an account balance of $25,000 to continue trading.
But this is where day trading and normal investing diverge tremendously. You don’t need thousands of dollars in the bank to invest regularly in a company. But in order to day trade, you need to make sure you’ve got a decent amount of capital saved up.
Secondly, there are time requirements for being a day trader. It’s easy to romanticize a job where you can work in your pajamas and be your own boss. But as a day trader, you’ve got to keep your eye on the markets.
You’ve got to know when to buy and when to sell (and know quickly!). You’ve got to know the current market patterns inside and out. These things, in and of themselves, are a full-time job and they can be stressful.
3. Find the Right Broker
You can hire a broker simply to execute your buying and selling. Or you can hire one that will also assist you with research and investment advice.
My best advice would be to get in touch with a few of your local brokerage firms. Then call them up and talk to a (real-life) human about the kinds of services they offer.
These days, so many bots and online firms can scam you out of money. You want to make sure you’re getting a broker who has experience with the markets.
You also want to make sure you’re working with a broker who respects your requests. If you’ve done your research and want to invest in these apartments and your broker pushes back and wants you to invest in those ones, that may be a red flag.
Brokers should suggest and advise. They should never coerce you into making a trade you don’t agree with.
4. Do Your Research
Do you know what trends are currently affecting the market? What about future trends? Are you up-to-date on the latest predictions?
Do you know what causes stock prices to change? Are you aware of all the factors currently affecting prices?
All of these things matter when you’re becoming a day trader. You need to know your stuff. Stock market price forecasting goes beyond mere supply and demand. So before you start trading, make sure you’ve read, researched, and developed a strategy of your own.
5. Don’t Bite off More Than You Can Chew
If you’re just getting started, don’t assume you’ll be able to manage 5-10 stocks at once. Start with one or two. This is an easy way to practice your skills and test your theories.
I’ve seen a lot of beginner day traders want to jump in and start making heaps of money fast. It just doesn’t happen that way. More often than not, they end up losing most of it and having to start from scratch.
Limiting yourself to one or two ventures at the start is a great way to apply the research you’ve done. If you come up short your first time out of the gate, reevaluate and try again. You’ll soon work your way up to managing more stocks.
Remember: Only Jump in When You’re Ready
Well, there you have it. All my wisdom for first-time day traders. Just remember that you don’t have to dive into day trading until you’re ready. (In fact, you shouldn’t!) Day trading is an exciting career and requires you to be on your toes with what’s current.
If you still feel like you need more help understanding how to become a day trader, keep reading. There’s plenty more to uncover in the world of day trading.