‘Day Trading’ is an activity that has always received a lot of attention, both good and bad. You may have heard of dramatic success stories and drastic failures. The truth behind these stories is that some people put in the effort that this field demands, while others don’t. You have more chance of succeeding, if you have ambition, patience and an open mind. Also, technological advancements have made trading a lot easier than it used to be. Are you curious to know if it is possible to make a living out of day trading? Let us find out.
MAKE THE RIGHT CHOICE
The first and foremost decision you need to make before starting day trading is the type of market you want to trade-in. Some of the popular options include Forex, Stocks, Penny Stocks, Cryptocurrencies, Commodities, CFDs, Gold and being the most common. The main factor that will affect your trading is the “volatility of the market.” A highly volatile market gives you more opportunity to make money. This is not the case when it comes to a saturated market. Each market possesses its own unique opportunities and difficulties. Understand what these are to prepare yourself before you start trading.
PROS AND CONS
Any endeavour has both positive and negative sides. If you think that ‘day trading’ is a lot less work than a normal job, then you would be wrong!. There is a lot more pressure involved in this field than you think. At the same time, the benefits are equally amazing. Some of the advantages are:
• ACHIEVING YOUR MAXIMUM POTENTIAL
If you are ready to put in the effort and are open to learning, day trading can help you work miracles. There is a lot of potential to earn a lot more money than what you make with a regular job.
• WORK SMARTER NOT HARDER
If you are smart enough to understand the nuances involved in day trading, you can start making money quite quickly. Once you get the hang of it, you don’t have to work very hard.
• YOU ARE THE BOSS
When you do day trading for a living, you are your ultimate boss. You don’t have to work for anyone else, and hence you will be relieved of constant pressure to impress someone with your work.
• LIFESTYLE ADVANTAGES
Life is a lot easier when you do not have to wake up early every day, wear a suit and commute hours to work in a mundane job. When you day trade, you have the comfort of your home without travel time, and so you can work more efficiently. You can also travel and work anywhere where you have a good wifi connection.
• FLEXIBLE WORKING
You are free to set your yours. So, you can choose when to work and how long to work for. And finally you are free of that annoying boss telling you what to do.
While all the pros of day trading seem promising, here are some of the cons.
You cannot always expect a steady income in trading like that of a regular day job. A lot of factors affect how much you make every month, and you will not always be in control of these factors. The reliability factor will keep fluctuating until to get hold of the techniques.
If you quit your day job and start trading daily, there will be two possible outcomes. The first one is that you will become successful at making steady money. The second one is that you might lose money or only make a little and are forced to quit day trading and go back to your regular job. In that case, your employability will reduce because of the break you took. Which will affect your career progression.
It is difficult to find a niche in daytrading because it is dominated by smart algorithms and large number crunching computers. That being said, you don’t have to get discouraged. There is always a place for ambitious individuals in this domain. So, be smart enough to discover your niche or trading method. You have to be flexible and keep learning to how to make more profits while reducing your risks. You might find it very difficult to adapt when the market conditions change and so may start losing.
HOW TO BEGIN
Like every other business, day trading also demands an initial investment. You need to have a decent computer or laptop and a good internet connection (or even 2 connections) to begin with. While these are fundamental, being aware of how the market works is also very important. Sit down and learn the basics. Then sit down again and learn the more advanced stuff. Develop a game plan that will help you make the most out of what you have. Since you can start day trading with small capital, it is up to you to make the most of it. You can also seek advice from trustworthy experts. After all, making connections is always a good idea in any business. Having the right broker also plays a vital role in day trading. So, put a lot of research and thought into the process of choosing your broker. Make sure that your broker is well regulated and has good transparency. Your broker needs to have a clear and user-friendly trading interface to avoid unwanted distractions. The customer support system should be very strong and reliable. Never compromise on the need to have a reliable broker with good facilities and support.
Once you have done all the above, you need to start working on your strategies to multiply your profits. This requires a lot of learning and practice. Keep your senses keen and be open to learning new things every day.
TIMES HAVE CHANGED!
The field of trading has undergone a lot of changes over the past few decades. The regulations used to be very strict, and you had to have large capital before you were allowed to trade. Things have become easier recently. There is more flexibility in the regulations, and you can start with a meagre capital of $1000. In the past, people found it very hard to make a living at day trading because of the strict regulations. Since that is not the case now, you can venture into this domain with more confidence and less capital. All thanks to globalization and the evolution of the financial industry!
CONTROL YOUR MIND
Most stories of people losing a lot of money in trading are because of emotional trading, gambling and greed. Focus on a disciplined approach with consistent and balanced effort towards your goal. A steady income is a primary thing that you should focus on. You cannot reach expertise in trading with just intelligence. It demands a combination of cunning, experience and emotional stability. It is not easy to stop anxiety when your trade is going against you. People who work on controlling their emotions and learning all the techniques can become well-versed very quickly.
LEARNING NEVER CEASES
You might assume that after establishing a successful career in day trading, there is no need for you to learn more but you would be wrong. Only those who have the determination to keep acquiring knowledge can continue trading successfully. Several resources can be used to widen your understanding of day trading. Fortunately you have all these resources readily available to you. You can seek help from various e-books, books, blogs, YouTube videos and other online sources if you have any doubts.
Take your learning a step further by interacting with like-minded traders on different discussion forums or chat-rooms. You can learn a lot from other people’s experiences. If you need to find solutions to a very specific problem, seek help from experts. Most people are open to sharing their intellect and experience.
KNOW YOUR OPTIONS
Many people do not explore all the different options available in trading and stick to the what they have been taught. Trading independently is the best option to move from beginner to expert. Look for markets that do not require huge capital. The forex market is one such platform. You can control a large capital with less money in your account because of leverage. This market is open throughout the week day and night, which gives you more time options. People who cannot trade during regular market hours can trade Forex early morning or late at night. The CFD (Contract For Difference) market is an alternative to Forex but trading costs may be higher.
Proprietary trading involves a financial institution investing directly in the market for itself instead of trading for clients. Many firms that do proprietary trading have excellent training programs that can help you as a beginner. Some people might not feel productive while working independently. Working for a proprietary firm as a contractor may be good option for such people. This is good because you can trade with the capital of the company, and the company will also maintain the risks to some extent. Thus, you will be relieved of some stress. One significant advantage, in this case, is that you will always be surrounded by successful traders, and the peer pressure will motivate you. If you have the required knowledge and education, it is quite easy to get into one of these firms.
HANDLING THE FINANCES
Once you have decided to make a living out of day trading, you should be cautious about how you spend and save your money. Save at least six months’ worth of income as backup before you quit your job to start day trading. This money is separate from the capital you are using, used for living expenses. Saving money will give you peace of mind so that you can be more focused on work. Keep a complete record of all the trades and transactions for tax purposes. After you start making money, have the habit of saving a specific portion. Build up a financial cushion to face any poor trading period without getting stressed.
DO NOT GET HYPED UP
Mainstream media always likes to target emotional people. You will keep hearing about new systems that claim to increase your profits dramatically. This might be true to sometimes, but most people tend to get greedy and start making impulsive decisions. One such thing is the application of machine learning in trading. This concept will work if you consider it as a tool to filter out options. Some of the results you get might not work out the same way in real-time trading for various reasons.
KEEP IT SIMPLE
Trading is a process that involves a lot of training, education, skills, and techniques. In spite of all these pre-requisites, you don’t have to view trading as a complicated process. Do not add unnecessary complexities to your trading system. Always simplify complex systems to arrive at a good method quickly. Complexity confuses you and obscures the reasons why you win or lose at trading. Evaluate your mistakes and learn from them. It is natural to get overwhelmed by all the pressures of day trading. Conquering your emotions and being calm is the first step to take..
Trading can become addictive over time. You will experience the constant need to improve different aspects of your trade. Ambition is good to some extent, but do not let it become toxic. Focus more on your trading performance rather than focusing on money. In the long run, you will be making good money because of consistent trading performance. Do not get impulsive and try out new things in your live account. Instead back test new techniques and try them out on demo accounts first. Channel the urge to perform better in the right way to get good results in day trading.
KNOW YOUR RATIOS
Trading is nothing but a game of numbers. Understand all your ratios and make every move carefully. Simple statistical analysis is a critical factor in day trading. Always keep your risk to reward ratio (quotient obtained while dividing net profit by the amount of maximum risk) in check. Aim for a 3 to 1 expected win to loss ratio. Try to have a clear understanding of the fundamental ratios involved in trading, such as return on equity ratio, working capital ratio, liquidity ratio, debt-equity ratio, and so on.
Trading journals are more important than you think. As mentioned earlier in the article, analyzing your mistakes will help you improve the way you trade. Many people use the data available on trading platforms as an excuse to avoid writing journals. Many even think it is useless. Once you understand the nuances of trading and grow as a trader, you will start realizing the importance of trading journals. You deal with tons of data as a trader daily. You can’t keep it all in your head. Keeping a proper journal of every single trade and jotting down your thoughts will help you improve a lot. Sometimes, spotting patterns in your trading can help you improve your gains drastically and reduce your errors.
Your psyche is more important than anything else when you trade every day. The continuous change in the amount of your income can have diverse effects on your mind. Strengthen your psyche and learn to keep calm during a trading crisis. In the beginning stages, you might feel an adrenaline rush when you trade. Accept the fact that trading and the accompanying stress has become a part of your life and figure out a way to maintain emotional stability. Meditate every day to improve the control over your mind or find some other way of emptying your mind.
A bright mind and sound body go hand in hand. You cannot expect to be healthy when you stress a lot and vice versa. Choosing day trading is great if you are ready to face all the consequences, both good and bad. Over-stressing can lead to many physical problems. Your physical well-being is very important for the proper functioning of your mind. Practice healthy eating and yoga on a regular basis. You can also play some sport during leisure hours to relieve stress. Swimming is a good option too. Make sure you get enough sound sleep after a long,tiring day trading.