Are you one of those individuals who enjoy the free hand of the market? Who would enjoy earning a profit daily with a great sense of the market?
Then your decision to start a career as a day trader makes perfect sense.
In today’s digital world, where everyone now has easy access to online trading, there still exist some basic requirements for entering the trading world. Precise analysis and preparation will help you start your career with ease and without hassle.
The Requirements Needed To Start Day Trading Are –
1. Conducting a Self-Assessment
A self-assessment is an important step before starting your career because the right mindset is the prime requirement for becoming a day trader. It will require you to dedicate long working hours, a continuous self-learning mindset, and a risk-taking attitude. The self-assessment will help you analyze if you possess this required skill set.
Day Trading will spare you with very little time off from work. This journey will be with minimum guidance and full of daily struggles. Self-assessment will help get an insight into the career path you are about to choose.
2. Market Knowledge
You will need to gain a broad knowledge base in trading. Increase your horizon of how the market functions and behaves in certain unsteady situations. Interacting with business professionals, investors, and fellow traders will help you gain market knowledge from all perspectives and improve your trading view significantly.
Daily economic or business announcements like economic statistics, corporate earnings, interest rates lead to market fluctuations. The detailed market research analysis will benefit you as day traders to make instant investments.
3. The Understanding of Securities
Securities involve all domains like Stocks, Futures, Options, ETFs, and mutual funds. Every domain follows a unique concept and market rules. You will require a strong understanding of specific security characteristics and trading requirements for initiating a trading strategy.
Every Trader has an original strategy figured out for himself. You have to come up with a strategy that will suit your specific plan. This strategy will depend on factors like how much capital you have, how much money you are investing on per trade basis, what frequency you follow to place trades per day.
No strategy is entirely correct or entirely wrong, so follow the process of continuous improvisation. Once you start trading, you can suit your strategy daily. Learn from the mistakes of yesterday and make the appropriate change in the strategy with a feedback loop.
Theory and practice are two different worlds altogether. Before you practically enter a career as a day trader, consider having enough training to avoid any unexpected circumstances financially or mentally.
Training will help you to be adequately equipped. Many traders spend a lot of time practicing trading to get a real feel of the market.
Play the field from outside before you enter.
6. Arrange for Sufficient Capital
According to Van Tharp, entering the trading world with an inconsiderable amount of money is a definite path to failure in day trading. A day trader’s salary is not guaranteed, hence you will be needed to have a firm capital base to land on during Unpleasant trading days. Create a financial plan to manage your annual financial stability.
Be realistic, be accurate, and plan according to your needs. There are possibilities that you may suffer losses in many trades in a row and recover with profit on only one trade. Hence, you need to possess strong capital to handle these risks in day trade.
7. Calculate the Opportunity Cost
You also have to consider the opportunity cost of the career switch. You might be earning a handful of amount from your previous job and have a good lifestyle set according to those finances. After this transition to being a day trader, you might earn more on some days and lesser on others. You have to be prepared to get a little conservative on your expenditures.
If, in case trading doesn’t go in your favor as planned, will you be able to fetch a job as before? Make sure to answer all these possible questions before committing to the leap.
8. Stock Trading Account
Let’s say you will need around $20,000 per day to trade regularly. You will require a separate Stock Trading Account to manage your trade money efficiently.
So one of the most important steps to start your career as a Day Trader is setting up the accounts. Remember, your personal expense account and brokerage account are always separate. You shouldn’t have to take money from your personal expense account to cover your trading cost losses. Similarly, you shouldn’t have to pull money from your trading account to cover personal expenses.
9. Research Brokerage Charges
Day trading means high brokerage costs. Therefore, selecting the brokerage plan is of grave importance to save your capital amount. Thorough research will help you find a good broker with optimum charges.
A broker also offers you several trading facilities like trading platforms, integrated trading solutions, trading software, historical data analysis, research tools, trading alerts, and technical indicators. They may offer some of these features free of cost, while some may come at extra charge. Be aware to discuss this clause with your broker before hiring him.
Taking a full-fledged leap towards becoming a full-time day trader could be overwhelming. This guide will help you prepare for a smooth transition.
Day trading is a roller-coaster career path with an extensive list of benefits and perks. A more realistic and practical approach to the career will lead you to a kickstarted beginning. Lack of knowledge about necessities can cost you big losses. Make sure you have the discipline, patience, organizational skills, and risk-taking ability to make the most of this career path.
If you see the instability of the market as an opportunity and are willing to take a risk, then day trading will be an exotic journey for you. Make sure you benefit from these guidelines for your new career.