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How to Get Started in Day Trading

Interested in day trading?
Interested in day trading?
Photo by John Moore/Getty Images

Trading is a tough job, but definitely has its perks. What many people don’t know is that you can earn a living using very little of your own money, and in some cases none of your own money. Here is how to get started in day trading.

How to Get Started in Day Trading: Anyone Can Do It

Most want-to-be-traders are under the false impression that they need lots of money, need certain connections, etc to become a trader. This is simply not the case. There are lots of options for all types of trading (day trading, swing trading or investing) that require very little capital (if any capital) and will provide you with the tools you need to succeed. If you go at it completely alone, then yes, you will need some capital to fund your trading and pay your bills, but going at it alone isn't the only option.

Day trading has a certain lure to it. Making trades and walking away at the end of the day with hopefully some money in your pocket (and quite possibly more money than most jobs) is a good feeling. First off, let's dispel a myth - day trading is not gambling. If you control your risk and follow a proven plan, then the odds are in your favor. That said, most traders lose money because they fail to control risk or don't have a tested and proven trading plan (or they don't follow it).

So let's look at the options available to those who want to start day trading, or are looking for a way to progress their day trading career in a different direction.

How to Get Started in Day Trading: Proprietary Trading Firms

There are many proprietary day trading firms all around the world which will hire and train you to become a profitable trader. Each firm is different, some require no capital be put up by the trader and others will require a deposit. No experience is needed, although it is common to have to go through several interviews which address how you psychologically respond to stressful situations, how well you can follow rules and how you balance aggression with logic and patience.

The process starts by simple sending a company your resume with your current background, no matter what it is, highlighting your entrepreneurial spirit and ability to work under pressure. Some countries have licensing requirements, while others do not. A firm may sponsor you to get the required licenses or they may require you get them on your own. The process for passing the necessary examinations or interview process is not an obstacle for most ambitious people, eager and humble enough to learn.

Once hired, the firm will provide you with capital (or leverage the capital you provided) to trade a particular market, or several markets. Training is generally provided and the extent of what they teach varies greatly by firm. Some will push you to trade a proven method, while others encourage the trader to develop their own methods.

The firm will often take a percentage of your profits and generally there are small fees associated with each trade. These fees vary from $0.05 to $3.00 per 1000 shares traded (ECN credits or debits may add or subtract from this amount). Each firm will have their own balance of fees and profit pay outs. Very low fees will often mean the trade will give up a higher percentage of their profits, and high fees will mean a lower percentage of your profits is filtered to the company.

The percentage of profits the trader is paid generally ranges from 50%-100%. Remember though, there is always a trade off. High fees can make it hard to make a profit, and 100% of nothing is $0. Where a 50% payout of a small profit, due to lower fees, is more favorable. Also, it is important to consider whether your own money is at stake, or just the firms capital. If the firm is risking their capital, generally pay outs will be lower or fees higher or some combination of the factors.

Also most firms do not hire you as an employee; rather you are contracted, and basically have your own business under the organization. This allows you to write off business expenses (consult the documentation and your own tax advisor). Some firms allow you to trade from home and some will require you be in a office.

If you want to start trading, it is something to look into. There are day trading firms in almost every major city throughout the world.

For a list of (many, but not all) proprietary trading firms, see: If you don't find one on the list that caters to traders in to your area, do a Google search for your current city and "proprietary trading firms," or search for proprietary trading firms that will allow you to trade remotely from anywhere in the world.

How to Get Started in Day Trading: Do It Yourself

Going at it alone is a tough but rewarding journey. You are in full control of everything you do, the fees you pay, how much you make/lose, your strategies and when you work. There is a definitely a lot to learn, but you keep all the money you make. The downside is that you need to fund and educate yourself. If you are a very social person, trading from home, by yourself, may be torture. Although there are always chat rooms or social media discussions you can connect with if you need some social engagement.

I recommend that you assume it will take at least six months to a year before you become consistent enough to draw an income from your day trading. This means you will need to fund your trading account and also have money left over to pay your bills. While you are learning to trade and gaining consistency, you may wish to have a part time job to ease part of the financial pressure.

For further information on how much you will need to day trade the forex market or stock market, as well as what to possibly expect based on slightly different perspectives, see:

  • Forex Day Trading with $1000 (or less) - A blueprint for how to build an income with a small trading account, by effectively utilizing risk controls, leverage and trading on a small time frame for a few hours a day.
  • How to Become a Day Trader - How to get into day trading; looks at trading from home or a proprietary trading firm. Basic expectations and traits.

Sorry for the list, but there is more information than what can be covered in one article.

Regardless of whether you decide to trade on your own, or trade with a firm, don't go into it expecting to become rich. Trading offers a life style. Very few traders become least not over night. Trading offers a way to make a living while having loads of free time to do things you enjoy, spend time with family and friends, travel... and not have to answer to a boss or go to a job you hate everyday. Don't underestimate these perks, as they are what create quality of life, not necessarily making loads of money.

Also, gaining consistency and making money will take time. If money is your only goal for trading, you will likely burn out before the money shows up. Trade because you like it and want to do it.

How to Get Started In Day Trading: Trading Alternatives (Swing Trading & Investing)

Day trading requires that you are be able to sit at your computer and trade for at least a few hours a day. If this isn't an option for you, then you may want to consider swing trading or investing. These are less time intensive endeavors, since you can typically look at some charts for a short time each day, set your entries, targets and stops and walk away.

Cory Mitchell, CMT

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