Are you looking for a thrilling and lucrative career that keeps you on your toes in the center of the financial world? If you love tracking financial trends and researching the stock market, you don’t want to miss out on untapped earnings and potential.
Knowing how to become a day trader is worthwhile if you want to enjoy analyzing the stock market and picking the right investments.
If you enjoy working with risk for an enriching career, here is all the important information you need to know about day trading and why you should consider this career path.
What Is a Professional Day Trader?
A day trader is someone who actively sells, trades, and buys stocks. However, these transactions typically take place within a single day.
Even though there are numerous job titles related to finance and trading stock, a person can only qualify as a day trader if they complete trades four times over five days.
The best part is that professional day traders can work for themselves if they do not want to be employed by financial institutions.
Although day traders can do the same duties as a general trader, a day trader has a higher equity requirement, meaning they need to start each trading day with a minimum amount to ensure their losses can be covered.
A day trader’s most common job responsibilities include the following:
- Tracking market trends daily
- Conducting trades with a rapid turnaround
- Funding trades from their personal account
- Buying stocks they believe may perform well
Most day traders work independently and conduct trades without the help of an outside firm. This has become easy thanks to technology, so you can conveniently work from home or at your favorite coffee shop.
Even though day traders can arrange flexible hours, many work daily to take advantage of fluctuations and trading opportunities. Otherwise, responding to frequent changes in the market would be tricky if you do not commit to the job.
How to Become a Day Trader
If you enjoy researching new types of businesses for investment opportunities and want the freedom to work independently, here are the steps if you want to get into day trading.
Open Your Brokerage Account
A broker is an individual or a business that can conduct trades for others. Since brokers are great at executing actual trades and researching a lot of information, they are knowledgeable when it comes to analyzing trends in the market.
This skill is very handy when you want to examine the performance of various stocks. If you have a broker account ready from the start, you can access more information about the stocks that pique your interest.
For instance, you can review numerous charts to help you grasp how and when stocks move.
Many independent brokers use brokerages, primarily online. This way, you also get the ability to perform trades using a mobile app or a website to make things more convenient.
Meet Equity Requirement
As mentioned earlier, you need a minimum equity requirement to get into day trading. This amount can be as high as $25,000 and is set by the Financial Industry Regulatory Authority (FINRA).
So, it is important to ensure that you have more than enough funds in your bank account to get into this lucrative career path.
The good news is that this money and the trading regulations are set in place to protect you from massive losses because you are fronting the money to cover your risks.
Conduct Four Trades
Another essential aspect of becoming a day trader is performing at least four trades over five days.
Even though it is common for many day traders to achieve more trades than four a week, this number should be a practical minimum to start.
Then you will not get too overwhelmed as you practice quickly opening and closing trades.
Many day traders can also open and close trades within a day. Therefore, making many trades at the start of your day trading career can help you reach a significantly high level of expertise in no time.
Verify Minimum Total Trades
Another vital requirement for day trading is that your trades must make up more than 6% of your total weekly trades.
This way, even if you conduct other trades that take more than usual time to complete, you must perform enough day trades to meet your 6% quota.
It is best to track the percentage of your trades made up of these transactions using basic calculations and a spreadsheet. Then you can always stay on top of all your trades to ensure that you never fall under the minimum percentage.
Seek Mentorship
When you start day trading, things can feel out of control and overwhelming if you juggle too many trades. It always helps to find a mentor who can encourage and enable your professional development by helping you set goals and giving feedback.
Mentors serve as an excellent source of knowledge and can give valuable insights and information to enable your day trading success. If you are lost, they can offer guidance to help you feel comfortable in your new role as a day trader more quickly.
Your mentor’s encouragement will motivate you to keep pushing past the initial challenges and can also help grow your network.
Since trust represents a core element of mentorship, you can expect your mentor to make you feel supported and listened to as you become more advanced as a day trader. Check out My Investing Club for more information.
Start Day Trading Today
Now that you know the basic steps of how to become a day trader, it is time to grow your knowledge and network to get into this competitive field with high rewards. Day trading has low entrance requirements apart from having financial equity.
So, anyone can grow their portfolio enough and become a hobby trader to make extra money. If you enjoyed reading this trading stocks guide, check out some of our other posts.
