How to Start a Career in Day Trading
- 1). 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.
- 2). 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.
- 3). 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.
- 4). 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.
- 5). 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.
