How to Get Started in Day Trading
Day trading is the practice of buying and selling stock within the same trading day. All trading positions held by day traders are usually closed out by the end of the trading day.
Day Trading Styles and Techniques
There are many day trading styles and techniques. One of the most common day trading techniques is known as “scalping.” Scalping means holding a large number of shares for only a few minutes. By trading a large number of shares at once, day traders are able to make a profit off of small moves in stocks. In some cases, a day trader can profit from a two-cent move.
Origins of Day Trading
Day trading became very popular in the late 1990s during a technology boom. This tech boom caused a bull market, which enabled day traders to make large profits daily and easily. Day trading became possible, and accessible to virtually anyone, with a high-speed internet connection.
Becoming a Day Trader
Before you start day trading, you must assess your financial situation. Day trading is a very risky business. According to some professional day traders, it can take more than a year before becoming profitable. You can open your own individual day trading account; however, the minimum fee to start day trading is $25,000, as stated by the U.S. Securities and Exchange Commission. If you do not have this amount of capital, you can join a proprietary trading firm. Depending on the proprietary trading firm you join, you will only need a security deposit, ranging from $5,000 to $10,000. The proprietary trading firm will then provide you with leverage, which, in most cases, is 10 to 1. Any losses you have will be deducted from your security deposit.
Direct Access Trading Platform
Professional day traders highly recommend using a direct access trading platform if you open your own trading account. This trading platform will allow you direct access to the electronic communications networks, otherwise known as the ECNs. Instead of placing your trade through a traditional broker, your order goes directly to the trading floor, allowing for faster and more accurate trades. If you join a proprietary trading firm, you will be provided access to their preferred direct access trading platform.
Day Trading on a Demo Account
Most day traders start on a demo account. Day traders practice mock trades on this demo account during the learning process. After a successful period of time on a demo account, a day trader will start trading with real capital. Most day traders suggest beginning with a smaller number of shares in each position to limit risk. They gradually increase their share size as they become more successful and more experienced.
Day Trading Success
According to industry studies, 90% of day traders fail. Day traders who are successful state that this profession is very rewarding and lucrative, and is unlike any other profession in the world. You do not have any customers, inventory, or services to perform. It is just you and the market.
Justin Blasi - Justin Blasi is the founder of Elite Trading & Speculation. Justin has been a long time passionate student of the markets and trades them ...
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