How to Start Day Trading

Posted by Profitable Trading Tips on Sunday, October 17th 2010   

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17
Oct
 

Day trading refers to buying and selling stocks with the same trading day. The day trader will typically have closed all of his market positions before closing bell on each market session. This occupation was once the province of professional investors and large financial firms but, with the advent of electronic trading, has become more available to many other traders. Because of the potential for profits many at home traders find the idea of day trading intriguing. The question for an individual is how to start day trading. What kind of money is necessary? Is how to start day trading about equipment or about knowledge. Typically the successful means of how to start day trading has to do with a mixture of hardware, software, brokerage accounts, and knowledge of the equities to be traded. All of hardware and software in the world will not help in how to start day trading without a firm knowledge the stock market and the discipline to learn what is necessary about technical trading. How to become a day trader is as much about character as it is about the high tech tools of the trade.

An active trader or day trader needs all of the knowledge and skill of other traders and investors. Then the day trader needs a special set of skills in order to profit from the sometimes small market moves within a trading day. Day traders can trade stocks, options, foreign exchange pairs, futures contracts, and more. For the sake of a discussion of how to start day trading we will limit ourselves to trading in the stock market. Day trading has become possible for many traders as electronic trading has brought the markets to the office and home. How to start day trading will require computer hardware with sufficient memory and processing capacity to handle large amounts of data very rapidly. Likewise the day trader’s internet connection will need to be secure and of sufficient band width to handle similarly large streams of data. Vendors of trade stations and software will list their capacities. The beginning day trader will want to check with the broker through whom they place their trades to make sure that their software and hardware are compatible and of sufficient capacity. All of the trading skill in the world will not let a trader take advantage of an opportunity or extricate himself from risk if his internet connection goes down. Aside from this technical detail the things that apply to how to become a successful stock trader are where to start for how to start day trading. “Pattern day traders” will need a margin account of at least $25,000 to continue trading.

With all of the tools in place the trader will want to choose a stock or stock index to trade. Then he will choose a strategy such as scalping, shaving, or trading price momentum. All strategies can be successful and all strategies need to be learned and practiced. How to start day trading is usually to practice in simulation while formulating strategy, taking online seminars, and engaging a trading coach to learn the finer points of profiting from day trading. In doing so traders will learn that day trading is not about trying to outguess the market. Day traders profit from judicious buying and selling during the day to take advantage of short term market discontinuities.

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