Day trading isn’t easy. It can be incredibly lucrative, sure, but many would-be day traders don’t last long enough to see the fruits of their strategies. Experts debate the merits of day traders as a whole, but it is clear that significant numbers of day traders lose money and fail. It is possible to make good money in day trading, and to do so consistently, but it certainly is not easy. Here are a few things you’ll need to succeed as a day trader.
Lots of startup capital
Day trading is a way to generate lots of wealth, but you need money to make money. And, unfortunately, getting into day trading isn’t cheap.
You’ll need at least $25,000 to invest, because that’s the legal minimum you’ll have to hold to have certain types of brokerage accounts and tools at your disposal. Really, though, you’ll need more than that — you’ll want a bit of a buffer in case your first few trades don’t work out, and the more you have, the more you’ll be able to make.
But this doesn’t mean that you should suddenly start day trading if you have $30,000 or so. You’ll also need money to not day trade — the stuff that will grow slowly in your retirement fund, for instance, and the stuff that will hang out in your emergency fund for when you need to make up for lost income and refund your account after a bad trade. Remember to fund or replenish these other accounts when you succeed with your day trading account. In short: Day trading isn’t cheap!
News, finance, and math resources
It takes a lot of know-how to trade. You should be doing lots of research and learning everything that you can about the financial world before you start day trading. You should also rely on news sources and other resources as you move forward. You always want to be up-to-date, and a subscription to a trusted news source such as The Wall Street Journal is well worth the price for a day trader.
You’ll also want resources for crunching numbers and performing calculations. Your brokerage app will probably have some good tools built in, but don’t be afraid to subscribe to, and bookmark, others. You want as much information as you can get, so make sure you have have quick access to a stock percentage calculator, stock charts, computer program scripts, and other tools.
The right trader mentality — and a lot of self-discipline
Day trading is a fast-paced, high-stress occupation. It takes a certain type of person to thrive in this environment, and an even more specific type of person to succeed in it. You’ll have to love the highs and lows, the thrills and fears, and the pressure that can mount as an open position exposes you to risk. But you’ll also have to be incredibly disciplined, because reacting emotionally to the crazy situations that you’ll see as a day trader can cost you dearly.
You’ll want to cultivate a calm demeanor as much as you can. Whether it takes visits to a therapist, a meditation routine, or simply a lap of pacing around your room, you need to stay calm and have nerves of steel while never taking your eyes off of open positions. You’ll also want to establish a strict strategy and set of rules and guidelines for your trades. In addition to helping you make the right decisions more quickly when time is of the essence, having a set of standards that you adhere to will help you take emotion out of the equation and execute the right decisions at the right times, even if your stomach feels like it’s doing cartwheels.
Succeeding as a day trader is difficult, but it’s not impossible. With the right attitude and the right tools at your disposal, you just might make it.
