Introduction to Day trading
Posted: Dec 08, 2018
A lot of men and women dream about making a living as a day trader. They are attracted by the idea of being able to work from home while at the same time earning enough money to be able to live a life of luxury. In this article, we are going to take a closer look at day trading is. It is it possible to earn a living from day trading and how much money do you need to become a day trader.What is day trading
Day trading is a type of trading where you move in and out of the market several times a day. Most positions will last no more than a few minutes and very few will last more than a couple of hours. The goal is to benefit from short positions and to profit from the volatility on the market. Any stock will go up and down in value hundreds of time each day. The day trader tries to move in and out of the market to benefit from these fluctuations.
Most day traders use Technical analysis to analyze the market and find opportunities to earn money.
Day traders tend to stay liquid most of the time and only move into the market to make quick profits. They do not care about the long term viability of a stock. They only care about what will happen with the stock during the next few minutes.
In my examples above I have been talking about day traders trading stock. Many day traders also chose to trade currencies on the FOREX market or commodities on the commodity market. You can day trade any asset that has large liquidity and that is volatile enough to provide good opportunities to make money.
High-frequency trading and algo-trading have made it harder for human traders to make money day trading. Better access to different markets have however also opened new opportunities that previously were not available to retail day traders.Can you make a living day trading
It is possible to make a living day trading but it is not easy and it is not for everyone. It is not an easy way to make money. To become a successful day trader requires you to work hard and stayed disciplined. Day trading is like everything else. You need to work hard if you want to be able to become successful. The harder you work, the more you analyze the market, the more money you can earn. If you think you will be able to spend a few hours in front of the computer each day making a lot of money then day trading is not for you. You need to be willing to work hard and spend countless hours a day tweaking your strategies if you want to become successful.
Most people who try day trading will fail. Between 70 and 90% of all traders who try day trading fails and end up losing money. Your odds of success are a lot higher if you are willing to use a demo account to learn how to trade before you start trading for real. If you are willing to spend a lot of time developing your trading strategies and backtesting them so that you know how well they are likely to work overtime before you start trading with real money.
You can never be certain that you will find success as a day trader but you can improve your odds of success by working hard and preparing before you start trading using real money. This is what separates the trades who end up making money and those who lose money. The traders who work hard have a high chance of success. The group who think it is an easy way to make money without too much effort is almost guaranteed to fail. The second group is a lot larger and it is up to you to make sure that you don't belong to that group.How much money do you need to make a living
You need surprisingly little money to make a living as a day trader. Many Forex and CFD brokers allow you to make leveraged trades. Some brokers allow you to leverage your trades up to 500 times. This means that you can invest USD1000 and expose yourself to a position worth 500 000. You will earn the same profit, or suffer the same loss as if you invested 500 000. You can invest USD 1000 and make a USD 5000 profit if the asset appreciates 1% in value.
It is possible to make a living as a day trader with as little as USD 1000. To be able to do so you need to be very skilled because one bad trade is enough to wipe out your entire account balance. Trying to trade with a small bankroll is very high risk and does not allow you to manage the risk in a proper way. You should ideally have a lot more money to start day trading. I recommend a minimum of USD 10 000 but 50 000 is better. How much money you need to become a day trader also depends on how much money you want to earn each day. If you do not need to earn that much each day then you will only need a small bankroll.USD 1000 can be enough if you are happy earning USD 50 a day.
Finance professional who likes writing about finance and pets.