How to Day Trade for a Living

Last Updated on May 3, 2020

A fast-growing industry packed full of excitement, many people find day trading a fantastic way to make money in their spare time. Yet, for some, day trading offers so many advantages, that it often becomes the first step towards building a permanent full-time trading career!

But surely it can’t be so simple for everyone? How do you know when it’s the right time to make the switch from part-time to full-time day trader?

Is Day Trading for a Living Possible?

This is an incredibly common question we get asked and of course there is no straight answer as it really depends on your own personal goals.

Many people expect day trading to provide a glamorous lifestyle requiring little work, when in reality day trading requires work and is a full time career. Day trading involves sitting at your computer and monitoring your computer screen, often for many hours at at time. There is no guarantee that it will make you filthy rich.

Of course, there are many advantages to being a full time day trader, that’s true. Being your own boss, in control of your time and work load is probably the most appealing benefit of day trading for a living. Trading on a laptop also gives you the freedom to change your working surrounding too, not an opportunity most regular jobs provide.

Pros and Cons of Day Trading for a Living 

Before making such an important and life changing decision, it’s wise to consider the various advantages and disadvantages a full-time career in trading has to offer.

The Pros: 

  • Being your own boss – Trading full-time means you don’t have to answer to anyone but yourself. Many people see this as one of the major benefits of working for yourself, regardless of the industry.
  • Choose your working hours – Being self-employed means there is much more flexibility in terms of the times of day you can start and finish working. This is great for people who hate mornings and find themselves to be a bit of a night owl.
  • Convenience – What is more convenient than being able to work from the comfort of your own home? Pretty much all you need is a computer, a desk and an internet connection and you’re ready to go.

The Cons:

Although day trading for a living does have it’s obvious benefits, there are some potential cons worth noting. The most talked about include:

  • Solitary Lifestyle – Not having to answer to a boss is an obvious perk, but for some people working alone all the time can get a little lonely. In fact some people really thrive in an environment where colleagues can offer support and guidance, so definitely something to consider.
  • Income Fluctuation – Unlike a regular 9-5 where the amount of money you earn is pretty much guaranteed, trading often means an inconsistent income. For instance, one month you may find you earn $4,000, while another you may find you earn just $2,000. In addition, when you’re on vacation no ones going to keep paying you.
  • Artificial Intelligence – Technology just keeps improving and more than half of all trades are now carried out by automated systems that rely on sophisticated algorithms to make decisions. It’s likely that the gap will get small over time and while humans will always be involved, they will need to adapt more and more.

How to Become a Day Trader for a Living

Before you decide to take the plunge and trade full time it’s important to be fully-equipped for life as a full time stock trader. This will ensure you are in the best position to make a generous salary. That means taking care of the following:

The Essentials:

Before you leave your full-time job, it’s essential that you have your trading set-up sorted, that means:

  • Hardware – Do you have a computer or laptop with the necessary specifications to carry out trading efficiently? Do you have more than one monitor, most recommend having at least two for trading purposes. In addition, you will need a fast internet connection, as waiting for pages to load could lead to potential losses.
  • Trading Strategy – You should be going into your trading career with a well considered strategy. The best are those that rely on the most data analysis, that means charts, patterns, and technical indicators. Ultimately it should allow you to make frequent profits on high volume, low-value trades.
  • Broker – Choosing the right broker can make a big difference, especially when it comes to profit and user-friendliness, so ensure you select a broker that offers competitive prices, reliable customer support, and a user friendly interface.

Financial Considerations: 

When it comes to financial considerations, there are two major things to think about – how much will you need to trade and how much will you need to cover your expenses. So, let’s try and provide some general outlines to both of these important considerations:

  • How much will you need to start Day Trading for a Living? 

In the U.S. it used to be the case that you could only day trade with at least $25,000 maintained in your trading account, but today many platforms allow you to begin trading with as little as $1,000 in your account.

But before you make any financial commitments here, consider the amount of money you’re prepared to part with should you incur any losses. Risk is an inevitable part of trading, so you’ll need to establish the percentage of capital you’re willing to invest in each trade and determine to never go above this.

  • Make sure you have a safety net 

Since there is risk involved and you are likely to be leaving your full-time job and guaranteed income stream, it’s wise to ensure you have a safety net to rely on for your day-today expenses. Ideally, you should have enough to cover your normal expenses for at least the next two years. This is important since it will relieve some pressure and means you are much more likely to make smart trading decisions, not ones that are made out of the need to pay for your rent.

Training & Education:

If you want to succeed in a trading career, just like any other you need to be constantly learning and fine-tuning your skill set. Thankfully, there is an abundance of resources available, some free and some paid.  Some of these include the following:

  • Books – refer to our list of best trading and investing books.
  • Ebooks
  • Audiobooks
  • Chatrooms
  • Blogs (like ours)
  • Tutorial videos
  • Forums – perfect for those looking to start making a living day trading stocks, futures, forex, and cryptocurrencies.
  • Study guides
  • Podcasts & MP3s

If you are considering trading full time, it’s likely that you already feel like you have the necessary expertise, but if you feel your trading strategies could be improved or you are a beginner, it’s certainly worth considering some professional training.

Managing Risk 

If you are going to be dedicating earning a living in the trading industry, it’s essential that you put together a plan for managing risk. You need a system that allows you to make the right moves, but doesn’t put you in a position where you will have to go back to your regular day job.

The best way to do this is to adopt a very common system called stop-losses and take-profits. This ensures you can make the best possible decisions without allowing your emotions to have too much influence in the process.

So how does it work?

  • Stop-loss – This is the price you will sell a stock at and be willing to take a loss. It means you won’t have to rely on hope that it will eventually return to its former price.
  • Take-profit – This is the price at  you will sell a stock take the profit. It allows you to keep that profit, by allowing you to sell before a period of consolidation begins.

Psychology & Mindset

If you are going to be working for yourself then it’s essential that you adopt a responsible and well disciplined mindset and do what is necessary to keep yourself motivated. Working for yourself means being in charge of your own daily work schedule, setting goals and following them through.

When you have been staring at the same screen for hours on end and the pressure is on, it can be easy to let your emotions get the best of you. It’s essential that you try to focus on the trade rather than the money. As the maverick trader Alexander Elder once said, “The aim of a successful trader is to make the best trades. Money is secondary.”

How to Day Trade for a Living

What Can You Day Trade?

One of the biggest decisions someone will make when committing to day trading for a living, is what exactly they spend the majority of their time trading? There are a multitude of different things you can trade in and profit off the changes in assets, including:

  • Stocks
  • Penny stocks
  • Forex
  • Cryptocurrencies
  • Futures
  • Eminis
  • CFDs
  • Commodities
  • Gold
  • Options

Exactly what you trade-in will depend largely on your personal goals and the amount of risk you are willing to take, since some markets are far more volatile than others. However many individuals thrive in these types of markets as the rewards can often be much larger compared to more stable markets.

Another factor is the saturation of a market, with the more stable markets that have been around for decades there tends to be more competition. While newer markets such as crptocurrency tend to be less saturated, yet there is more risk involved.

Day Trading Beginner Tips

Before you get started on your day trading activity, there are several tips for day trading for beginners, to bear in mind:

  • Decide before you start day trading how much time you can commit to it.

Though day trading is a great way to get started trading immediately, monitoring the markets does take up a considerable part of your day, you’ll also have to devote time to searching potential trading markets.

  • Ask yourself how much money you’re willing to risk on day trading?

Before you make any financial commitments here, consider the amount of money you’re prepared to part with should you incur any losses. Risk is an inevitable part of trading, so you’ll need to establish the percentage of capital you’re willing to invest in each trade and determine to never go above this.

  • Work on building your trading knowledge before you begin.

Though day trading is accessible for many people, it’s also a complex industry the further you get into it. Being in the know can work in your favor here as a greater awareness of trading improves your decision making each time. This is especially important if you’re new to the whole concept of trading. Read a how to day trade book and search the internet for how to start day trading.

  • Leave your emotions behind when you trade.

Day trading, and indeed all other trading types, requires you to keep a clear head at all times. There’s no place for fear, nerves, or greed when entering this industry. An often high pressured environment, day trading demands logical and strategical thinking – which can only come from a sense of calmness.

Day Trading Strategies

There are considered to be no less than five trading strategies that work best on the day trading market. These include:

  •  Scalping – The most popular choice among day traders and beyond, scalping encourages you to capitalize on last-minute price changes. This means selling straight away as soon as your trades become profitable. Scalping is an exciting strategy in use but does require a somewhat sixth sense of the market.
  • Breakout – A favorite strategy amongst those traders accomplishing the more substantial of gains, breakout works on price clearance on the trading charts. Though it requires more knowledge and observance in the way of setting up and execution, it does work on increasing volume.
  • Reverse – Again another method favored by experienced traders, reverse day trading is perhaps a cautious strategy but one that offers higher probability. This requires you to trade against the trend and immediately pull back when correctly identifying possible pullbacks.
  • Momentum – Perhaps a simpler strategy, momentum can be employed during day trading to capitalize on those newer sources offering higher volume support. This is ideal for beginners and thoroughly effective, provided you show awareness of news and announcements that can affect your trading beforehand.
  • Pivot Points – Widely recognized throughout the day trading sector, the pivot point strategy allows you to identify and act on critical support as well as resistance levels. This method is highly favored by those looking at gauging indications ahead of time.

What Times Are Best to Day Trade?

There are specific times of the day whereby trading is claimed to be more profitable. To understand why it’s worth looking at the dynamics of the trading market overall.

Many day traders find the first hour of the day their most successful time, as opposed to the other time frames. There’s no denying that the most volatile time of the trading day occurs within those first 20 minutes of the opening bell! But, for those newbie traders, this isn’t always recommended, especially considering volume will be at its peak during such times.

However, many successful day traders will suggest trading up to the 11.30am mark. Here, the market becomes more settled, volatility dries up, and it’s perhaps the safer of windows.

Top Tips for Day Trading

  • Start your day trading adventure small. In the beginning, concentrate on one or two stocks throughout each session.
  • Be cautious of sites that encourage you on how to day trade penny stocks. There’s less probability of opportunity for profit here, especially if you haven’t yet done your research on them.
  • Remain realistic about your potential profits. You won’t win on all trades, but the knowledge that you gain from each loss should be a valuable lesson.
  • Make a plan and stick to it! With a good trading strategy developed before you begin, you’ll be less likely to follow your emotions and rely on a pre-planned strategy instead.
  • Always look out for further places to fuel your trading knowledge. Access plentiful trading areas and discover financial services, see how to day trade on robinhood, or how to day trade reddit to get started, for good examples.

Final Thoughts on Day Trading for a Living

If you’re serious about making a living from day trading, there are several day trading sites offering demos that you can access for free to get started.

As with all financial investments, risks are inevitable. But, if you arm yourself with as much knowledge of the markets before you fully commit, take it easy, and trade within your means – there’s no reason why day trading can’t become a viable career choice.

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