- 1. Chapter 1: Introduction
- 2. Chapter 2: What is Day Trading?
- 3. Chapter 3: Difference between Day Trading, investing, and swing trading
- 4. Chapter 4: Benefits of Day Trading
- 5. Chapter 5: Trader Types
- 6. Chapter 6: How to become a day trader?
- 7. Chapter 7: How to determine the best day trading stocks?
- 8. Chapter 8: When to Day Trade?
- 9. Chapter 9: How much can you make day trading?
- 10. Chapter 10: Can you start day trading with $100?
- 11. Chapter 11: Do day traders get rich?
- 12. Chapter 12: What percent do day traders make a day?
Chapter 1: Introduction
Those days are gone where only large financial institutions, brokerages, and trading houses actively trade. With the rise of the internet, online trading houses increased. That has enabled an individual to get into the game of investors.
When it comes to trading, then experts used to say Day Trading is a very lucrative career. It can be challenging for beginners but only when they haven’t fully prepared with a perfect strategy. Even in trading, the most experienced trader can also hit the rough patches and experience losses.
So beginners don’t worry. Slow and steady traders can also win the game. In this article we will discuss all the possibilities for how to become a day trader?
Let’s understand what exactly is day trading and how does it work?
Chapter 2: What is Day Trading?
As the name suggests, Day Trading stands for a day trading strategy that does not require you to get involved in taking overnight positions.
Day trading is a process of buying and selling stocks, securities, then selling them on the same trading day to make a profit. Day traders have to clear their opened and closed transactions at the close of the market trading day.
So, Day trading is different from investing and swing trading.
Chapter 3: Difference between Day Trading, investing, and swing trading
- Day Trading VS Long-Term Investment Strategy:
In a long-term investment strategy, one holds securities and stocks to get a profit over time. Whereas, Day trading is different. It is all about buying the dip and selling high with the long/short-term prospect of securities and exchange commission. That means notably less immediate volatility.
- Day Trading VS Swing Trading:
As we have discussed, If buying and selling of trades is done on the same day, then it is called Day Trading. Whereas, Swing trading owns securities for a few days or weeks. Swing trading has some similarities to Day trading, but both the tradings are not the same. Swing traders can trade over multiple days to get more profit in the fluctuating stock market.
Chapter 4: Benefits of Day Trading
- Virtual Trading:
You can trade from anywhere. It just required a laptop, Wi-Fi, a broker, and trading software.
- Be your Boss:
Trading is not a 9-to-5 job. You are your boss, and you can start with a small account. If you want then you can open your trading account in Coincasso cryptocurrency exchange. The platform is the first choice of million traders.
- 4:1 Profit:
You can get better leverage with day trading than holding a position overnight. If you meet specific criteria, then day trading stocks can leverage you with a 4:1 ratio.
Trading always fascinates people, but no one can become a bull overnight.
So, you must have to choose: which type of day trader you want to become?
Chapter 5: Trader Types
Becoming a day trader, you have to be aware of the types of traders.
There are many approaches to trading. So you can be
- Casual day trader
- Part-time day trader
- Full-time day trader
Casual day traders tend to buy stocks randomly. Mostly these types of traders buy and sell stocks spiking based on a piece of big news. Even so, Casual day traders may take weeks or months between their trades.
Part-time day traders usually trade once or a few times a week. These traders prefer trading in the mornings or afternoons.
Full-time day traders spend their time to understand and analyze the market, and then they trade full-time. It takes knowledge and experience.
- To become any of these traders, you have to find time for trading education. In this planning, you must have to back up enough money to pay your bills during trading.
Trading terms do not end here. There are a few more that you must have to be aware of.
Key Trading Terms:
- Forex Market Trader: Forex market stands for the foreign exchange market. There are two market places where Day traders make trades: Forex Market and Stock Market.
- Professional day Trader: This type of trader has a license to day trade for livings. If you are wondering to be a professional day trader or wish to work in a brokerage firm, then get registered with the SEC.
- Pattern Day Trader: According to the Financial Industry Regulatory Authority (FINRA), a pattern day trader is the one who trades four or more times in a 5 day period.
- Margin trader: The trader who uses borrowed funds from a broker to trade is called a Margin trader. Though it’s risk trading, the margin traders can trade using their Margin account.
To become a Day trader or a competent investor it is a must to understand key trading terms.
Once you decide which trader you have to be, then you need to find out how to become a day trader?
A lot of people think becoming a Day trader is an easy way to make money. Just click a few buttons, and Bingo, you are rich! But nothing is further from the truth.
Once Warren Buffet said: “The market is a device for transferring money from the impatient to the patient.”
So, according to this, the impatient one is likely to lose money during trading. So if you don’t want to lose money in trade, then follow a perfect strategy for becoming a day trader.
- Don’t consider trading like a hobby or a job.
- Treat trading like a business.
- Learn everything about this business and set realistic expectations.
Now, it’s a perfect time to focus on how to become a day trader? So, without delay let’s begin:
Chapter 6: How to become a day trader?
To become an expert day trader, you have to perform a personal audit, market research, build a strategy, and choose potential platforms.
Follow these steps to become a Day Trader
Step 1: Trading Strategy:
There are several intraday trading strategies. But the most effective ones used by traders are:
- Scalping: Scalping is a popular day trading strategy used to make numerous small profits on trading positions throughout the day. Scalpers use ultra-fast reactions on often enter and exit trades within seconds or minutes. Traders need to plan their entry levels consciously well. Also, they need to choose the high probability trades in highly liquid and active assets and quickly cut losses.
- Range trading: To determine to buy and sell decisions, Day traders use this trading strategy at the primary level for support and resistance.
- High-frequency trading (HFT): To implement this strategy, one has to analyze and use sophisticated algorithms to utilize small or short-term market inefficiencies.
- News Trading: Deep-pocket and substantial risk appetite traders use news trading strategy to gain profits from the highly volatile market after publishing the key news. To get into this strategy, newbies analyze the economic calendars, news feeds, and news events. To become an expert, News traders do fundamental and technical analysis on risk events and observe the resistance level to act fast while news comes out.
Step 2: Risk Management:
If you are a newbie, then it will be smart to start with small. Learning Day trading takes time, So don’t risk yourself by putting a lot of money on the table. Risk management with Day trading means you must have to prepare for losses and make your mind to use the money that you are comfortable losing.
Step 3: Technical Analysis:
Reveal trading analysis for oversold and overbought levels by using momentum indicators, like Relative Strength Index (RSI) and the Stochastic Oscillator. Day traders practice to buy into oversold markets and sell into overbought markets and use this analysis at the right time at a perfect level for active trading.
In technical analysis, one must gain knowledge about a pivot point – The technical analysis indicator. It uses a previous period’s high, low, and close price for a specific period to define future support. And this determines different timely stock market trends. Day traders use its support and resistance to buy trades when the pivot point is ahead and below the market and sell it when the pivot point is above the market.
Day traders use to analyze the price chart to identify the market trade pattern to predict value. Once the market breaks out, they set the goal to suggest how far this breakout will continue in the market. At the breakout point, traders try to close the trade near the estimated price objective.
Day traders use Candlestick charts to determine the possible price moments based on past patterns. Candlesticks dictate the emotions of trade, the size of price moves visually with different colors. The candlestick charts show the daily market’s open, high, low, and close prices.
Step 4: Avoid Penny Stocks
At the initial level, you must be looking for low price stocks or deals. But stay away from Penny stocks as these stocks are often illiquid and hit bleak jackpots.
Step 5: Backtesting of Strategies
In trading strategies you have to consider backtesting strategy too. Backtesting your strategies will help you to find your edge in the market without risking real money. Check out your strategies on historical data. If you workout, then it will give you confidence.
Step 6: Choose suitable software
Use the most popular software and tools for day traders,
- Robinhood: Robinhood software is the best choice for all Day traders as one can use this software for commission-free trading and easy app and web accessibility. This software makes money from various sources, such as selling order flow, large brokerages, and cash in accounts.
- TradeStation: If you are an algorithmic trader, then prefer to use TradeStation software. It enables you to execute trading strategies using automated scripts developed with an easy language.
- TDAmeritrade: TDAmeritrade is popular software amongst traders and investors. It is also known for its acquisition of ThinkorSwim and the trade architectural development.
- Interactive Brokers: Interactive Broker is one of the best trading platforms with low fees, and professionals can easily access it globally.
- MetaTrader: MetaTrader is a popular platform for those who want to participate in the foreign exchange (forex) market as the platform interfaces with many brokers. Even more, its MQL scripting language has gained more popularity for its automating trading in currencies.
- Webull: Webull is a perfect choice for beginners. Webull offers a zero-commission and no deposit minimums facility traders.
- Before starting your trading day, make sure you have your suitable software available.
- Traders can choose Coincasso cryptocurrency exchange platform for trading.
Step 7: Know when to stop trading
If you feel your trading plan is ineffective. Or you are not performing up to the mark, then stop trading for a while.
An ineffective trading plan represents greater losses than expected from historical testing. Market saturation may happen, or volatility may have decreased. Whatever the reason, you find your trading plan is not performing as expected, then stop for a period and analyze the market again.
Stay businesslike. In trading, you must have to stay unemotional. If one trading plan doesn’t work out, start over with a new one. Losses happen.
So it’s time to stop the current trading plan, not the trading business. Solve the loopholes.
A trader comes under the ineffective trader list because of poor habits, lack of passion, external stress, unable to predict the market. For the trader who can not be in peak condition, it is advisable to take a break, then start with a fresh.
- Traders and investors have to consider several things to balance trade-offs before selecting a trading platform.
- The Trading software and tools used to operate and manage market positions.
After knowing all the steps of how to become a day trader, one must have to be aware about best day trading stocks.
Chapter 7: How to determine the best day trading stocks?
In the Day trading and stock market, losses are the only guarantee over profit. And if you want to cover losses into profit, then do a careful analysis of the critical market.
Consider the following methods to determine the best trading stocks.
- Price-to-earnings (P/E) ratio
The P/E ratio of a company will give you insight into a specific company’s comparative growth potential from the same industrial competitors. The price-to-earn ratio is measured based on the current stock trading value to its past 12 months’ earnings per share.
- Price-to-earnings growth (PEG) ratio
The PEG ratio can help you know how a company might grow in a future year or two. This ratio determines by comparing the company’s expected earnings growth with the stock’s P/E ratio. The higher the PEG ratio you get, the higher company’s growth potential is assumed.
- Debt-to-EBITDA ratio
A debt-to-EBITDA ratio will give you a sense of whether your traded company is having a high-risk investment or not. The higher the Debt-to-EBTIDA ratio of a company, the company’s debt will rise with its earnings. And less Debt-to-EBITDA ratio suggests a low risk in company investment.
Now, if you are confused to apply these methods then do testing on two or three stocks based on the fundamentals of these methods. Analyze it over time. Prepare notes about results, stock values, and the effect of your strategy.
Chapter 8: When to Day Trade?
Either you are a beginner Day trader or a pro trader, your life as a trader requires consistency. And there’s only one way to maintain consistency is to trade every day at the same time.
Many traders regularly trade between 9:30 to 4:00 p.m. EST, like U.S stock market traders. And some trade for a specific interval of a day. Research shows daily two or three hours of trading per day is an ordinary trading timeframe.
Let us discuss in detail:
- Best time to trade in Stocks:The best time to trade is the initial one to two hours and last one hour before the market closes. In Stocks, if you Trade between 9:30 a.m. to 11:30 a.m. EST, then there’s a big chance to get the biggest price moves and most profit. That is the reason starting 2 hours is called volatile time for trading. You can get sizable moves between 3:00 p.m. to 4:00 p.m. But, if your preferred trading time is only one or two hours, then use the morning trade session.
- Best time to trade in Future Market:In the Day trading Futures, the best trading opportunity starts earlier than the stock market. If you want to Day trade, then prefer 8:30 a.m. and 11:00 a.m. EST. Even the last hour of the Future market is also the best time. But there are different official close times. So make a sizable move.
- Best time to trade in Forex:This market trades 24 hours a day during the week. As EUR/USD is the most popular trading pair, the greater trading volume one can notice is between 1:00 am. and noon EST (London market open time). Even more, when the 7:00 a.m. to 10:00 a.m. EST (London and New York Market opening time) is considered for the biggest price move.
Chapter 9: How much can you make day trading?
The amount of money a day trader can make totally depends on the targeted market and its fluctuation. Day trading earning factors that matters are:
- Which market you trade:
Advantages vary with a different market. If you trade in stocks, then you will get a more capital-intensive asset class. But if you trade in Futures or Forex, then you can start trading with fewer capitals.
- How much money you start with:
If you spend $2,000 to $3,000, then your income potential will be far less than the one who starts with $20,000.
- How much time you put into your trading education and market research:
If you want a consistent Day trading income, you must have solid research on market fluctuation, trading strategy, and dedicated time. But if you are planning to practice part-time trading, it may take several years for real consistency.
- Your potential income is determined by your trading strategy, patient, and discipline.
Chapter 10: Can you start day trading with $100?
Yes, definitely you can start with $100. How? That totally depends on the strategy you plan. Technically you can plan Day Trade with $100 efficiently, if you plan this way:
- Step 1: Select a brokerage.
Finding an online broker that allows you to trade in the style you want will help you successfully conduct trades.
- Step 2: Pick the securities.
Before trading, do perfect research on trades on which you want to trade. So pick your securities carefully.
- Step 3: Work out a strategy.
Initially, pick your trade strategy that we have discussed earlier.
- Step 4: Begin trading.
Set up your trading account with the necessary prerequisite steps.
Chapter 11: Do day traders get rich?
Day traders can make profit and loss based on the strategy or spending amount. Yet, day traders can make great returns.
Now, you will think if Day traders can get rich; then, why are there a few Day trading Millionaires. The reason is simple. People don’t talk about Day trading on business, news, or television. Most day traders work from home, and many few have public profiles. Moreover, people hear about investors, not about Day traders. So, just because people don’t know a lot about Day traders, that doesn’t mean they are not rich.
Chapter 12: What percent do day traders make a day?
If a Day traders can successfully implement a trading strategy, then there is a chance to make more than 20 percent per month – Stated as per theories. But how much they will get per trade is not predictable. It depends on what trade you have invested per trade. Yet, this is a very high return as per typically standard. So most of the Day traders should not expect it due to real-world issues such as slippage. Some can’t make this much profit because they can not always achieve a full position to win the race.