Day trading involves a lot of skill, time and certainly money. It can be a great way to earn money, but you’ll need to know what you’re doing and why before you start trading.
In reality, due to the fact that you’ll need $25,000 capital in front for day trading stocks – it’s not always the best option for beginners.
However, this does not mean that every beginner should be put off by this. This guide will examine day trading for beginners. What you need to know and do, along with other handy tips.
So, if you’re looking to start day trading – read on to learn more!
What Is Day Trading?
Day trading involves buying and selling batches of securities in either a day and can even be in seconds and minutes.
It differs from the traditional form of investing and is more about trying to exploit the movements of up and down sessions within trading.
Generally, day traders (see also ‘Why Do Day Traders Fail?‘) are highly educated on how day trading works and how investments work in general. You will normally find a day trader (see also ‘How Do Day Traders Lose Money?‘) takes advantage of four main strategies.
- Scalping: Honing in on multiple small profits throughout a day
- Range: Using already predetermined support and resistance levels of prices which will tailor the behaviors of the trader
- News-based: Using events from around the world to take advantage of trading opportunities
- HFT (High Frequency Trading): This strategy looks at inefficiencies in a market using very complex algorithms to take financial advantage of short term markets
The Basics For Beginners
Unlike other forms of investing, day traders will not be bothered or interested in the movement of the market as a whole.
You’re looking at individual tradable assets, and as long as there is movement in the stock market, you have opportunities for money.
As we mentioned, there are different ways to day trade. Many day traders are extremely active and will make many trades throughout the day by buying and selling securities.
Others however, will focus on one specific security for that day and profit from that. Your strategy will play a significant role in what you will do and how much money you make overall.
Many day traders will use a price chart to help them decide whether or not to make a trade through their brokerage account.
It’s important that you recognize as a beginner that day trading is not a get-rich-quick scheme and it’s very possible that you could lose money. However, it’s not required to spend countless years learning everything.
A couple of months of preparation before you go live is perfectly acceptable as you work out how to develop a strategy. You must think of a couple of things and know the following factors:
- How trading works
- When you should buy and sell
- The strategies of day trading
- How to limit your losses
- How to understand and read a price chart
Can You Make Lots Of Money As A Day Trader?
As we said, you should not consider day trading as a way to get rich quickly.
The amount of money you make will depend on many factors like your experience, your strategy, the amount of money involved and if you’ve limited your losses well.
It’s important to understand too, that private day traders use their own money when they are day trading – whereas others are salaried.
Salaried day traders are using the monetary funds from banks or other hedge funds, and they will be paid regardless – but will likely receive bonuses for particularly successful times.
Their average salary in early 2022 was over $80,000 but this sort of money will be wildly different from trader to trader.
Trading With $500-$1000
Every market has a potential but a lot of what you get back will depend on what you put in to begin with. You’ll want to focus your attention on one market when you get started though, so you don’t get confused and lose concentration.
Once you’ve mastered one market, you will be able to move up to multiple markets.
If you want to start off trading with $500, you’ll want to set your focus on FOREX (the Foreign Exchange Market).
This is where you will be trading currencies like the United States Dollar (USD) or the European Euro (EUR). Kicking off your trading in this market can be done with a minimum of $100, but it’s always a good idea to bump this up.
If you can, start yourself off with $500 and see how you fare. You can move on from this if you are particularly successful.
If you want to move onto the futures market, there’s no defined minimum equity spend, but each brokerage will set its own minimum requirements.
Depending on this brokerage then, you may be able to open an account for $1,000. There’s lots to think about in this market, and generally you’ll be looking at commodities like oil and gold.
Does This Equal Success?
There’s no possible way we could tell a beginner that these ways will always earn heaps of cash.
As we mentioned, there’s too many variables and you will have to get experience and knowledge in day trading to start bumping up your return.
What Do I Need As A Beginner?
If you want to start day trading, there’s some basic things you will need to have.
- A computer
- A reliable internet connection
- A trading platform (like NinjaTrader for example)
You will also need to get knowledgeable about how day trading works and how to read price charts of course.
The Bottom Line – Is It Worth It?
When asking if day trading is good for beginners, there’s no definitive answer. If you are able to become very knowledgeable, then it’s possible to earn money.
But remember, do not use day trading as a way to get rich quickly.