Work from home, have your own schedule, wear pajamas all day.
Sounds like a good gig to me. Or maybe you just have a fascination with the open markets and think you can beat them? I mean, there’s not a more exciting way to earn a living than off of the market’s gains and losses?
If you’re wondering how to start day trading, keep reading our guide on how to be successful.
1. Understand the Markets
Day traders need to have a strong understanding of the markets and how they function. Everything from trading hours to margin requirements to tradable instruments.
Day traders also need to stay current on news and events and understand how they can impact the markets.
Once you understand how markets work, choose a market to focus on and become an expert in it. Day traders work to find patterns and then profit off those patterns. This is why it’s best to learn one market at a time.
Also, different markets require different amounts of capital to start investing. For example: to trade stocks you must have $25,000 of capital, while trading in the Forex market only requires $500.
2. Equipment Needed
To start day trading from home, you’ll need to get some basic office equipment. Here is a list of the essential items you’ll need:
A Computer or Laptop
Your computer should have adequate memory and a quick processor. This ensures that there is no lagging or untimely crashes when you are trying to make a trade.
Day traders should be using at least a mid-range internet package that includes a Cable or ADSL type internet connection.
We’re not saying you have to have the fastest internet on the block, but a slow internet will interfere with your trades.
To start, download several trading platforms and try them all out. I will take a while until you find your own trading style. Your platform may occasionally change throughout your career. Just get a good idea of different ones that are available.
A broker will facilitate your trade, and in exchange will charge commissions or fees on your trades.
3. When to Day Trade
The secret to being a successful day trader is consistency. As you start working from home, make sure your trading hours are the same each day.
Most day traders only work a portion of the day. Usually trading for 3 to 4 hours at a time is sufficient to meet your goals.
Also, know what times of the day are moving for your market niche. Stocks are traded during the first 2 hours and an hour before closing. Futures move the most at the beginning of the day, and the Forex market is open 24 hours.
Make sure you are aware of the open and closing times of each market, and what time zone they are in.
4. Manage Your Day Trading Risk
Day trading sounds exciting — until you’ve lost all our money. To be successful, you need to know how much you risk you can take.
There are two types of risk to be aware of: trade risk and daily risk.
You don’t want to lose all your money in one trade or wipe away a month’s income in one day. Your trade risk should be 1% of your capital, while your daily risk should be 3%.
If you lose more than that then stop trading and take the day as a loss.
Now You Know How to Start Day Trading
Now you know all the answers to “how to start day trading.” Set up your office, put on your sweats, and let’s do this. By following these 4 tips, and with a little practice and patience, you can become a successful day trader.
And while you’re at it, check us out for all our small business needs. We’ve got all the tips you’ll need.