Becoming a Day Trader - Getting Started
Financial experts and others in the field have deemed it imperative that individuals not look at day trading as a get rich quick scheme. Day trading is a risky business and should only be undertaken by people who fully understand the process.
In addition to discipline and education, there are many important factors of day trading that an individual must familiarize themselves with if they are to be successful.
Tips for Aspiring Day Traders
Basic Software and Hardware
- Simply put, you need a reliable computer and Internet connection.
Study the industry in depth before getting started.
- It is imperative that before you become a day trader, you become a student of day trading. This process could, and should, take a few weeks (or even months). Aspiring day traders should look at this time as a college course (or better yet, a graduate level course) in day trading. For new traders, it is best to focus on the general aspects of investments and trading, as well as the financial arena and the markets, and work your way down to some of the specifics of day trading, such as trading styles and analytical tools.
- If a local community college or university offers courses in day trading, or basic finance or economics courses, enroll in them, or audit them. Either way, you are gaining valuable knowledge in the field you plan to enter.
- Read books. There are countless books and manuals for day trading. These books cover general information, strategies, online day trading, and other topics in the field.
- Search the internet. There are numerous, well-respected online sites for individuals interested in a career as a day trader. There are also online forums and discussion groups where an individual can learn form others' experiences, and learn some valuable inside information for the trade.
Practice using an online simulated trading system
- Day traders use online trading platforms. These platforms allow you execute trades, do research, track charts, and will provide with most of the information need throughout the trading day. After you've researched plenty of online day trading websites (and before you start trading with real money), it is important to choose one that you feel will work bets for you. It is also important to choose a site that will give you the opportunity to practice day trading with a simulated trading platform or a trading demo.
- This experience will prove invaluable as you can test different trading styles and you can practice using different trading strategies. In a sense, you will find out what works, and what doesn't work for you as a day trader. You may even find out that day trading isn't for you. Like anything, it is important to practice, if you can, before taking on the real thing.
Decide what market(s) to participate in
- Your research into the field and your time practicing on a simulated online trading platform will give you the opportunity to determine what market, or markets, you want to trade in. Some things to consider when choosing a market are: location, volatility (profit/loss potential), your trading style, and the amount of money that is required to start trading.
- Some popular markets are:
- Commodities Market
- Stock Market
- Currency Market
- Then after selecting a market, you will be able to choose what financial instruments you want to focus your day trading on. Most of the markets available to you will give you the opportunity to trade stocks, options, and futures. But, some markets will limit you.
Decide what types of financial instruments to day trade
- When deciding what financial instruments to trade, you have to look at several key factors, including:
- Price movement/volatility
- Time. At times, day traders find it difficult to trade futures or options due to the time constraints.
- Industry. A fundamental aspect of research, but an important one.
- As mentioned before, the most popular instruments to trade are stocks, options, futures, and currencies (see definitions in What Day Traders Trade section). The decision of what instrument to rely on in your trading will be a result of your trading style, your trading personality, and your willingness to take risks.