Day Trading As A Career – A Complete Guide

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Want to enter into an open field of day trading? This article will help you to navigate it seamlessly.

Day trading can be pursued as both either a hobby or a complete fruitful career. You just need to make a firm decision and dive into this miraculous ocean.

What is day trading?

Day-trading refers to the practice of buying and selling financial instruments within the same day with the intention of making a profit from small price fluctuations in less time.

It helps to avoid unmanageable risks and negative price gaps between one day’s closing and the next day’s opening price.

Which type of financial instruments can be day-traded?

Some commonly day traded financial instruments are-

  • Stocks – In American English, stock is a collective noun for shares. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares.
  • Options – It is a contract which conveys its owner, the holder, the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price (or fixed price) prior to or on a specified date, depending on the form of the option.
  • Currency – Most popular trading currencies are the U.S Dollar, the Euro, the Japanese Yen, the Great British Pound, the Canadian Dollar, the Swiss Franc.
  • Crypto-currency – It is a form of digital asset (virtual currency), secured by cryptography, based on a large network that is distributed across a large number of computers. Some crypto-currencies are Bitcoin, Ethereum, Cardano, etc.

Who is a day-trader?

A market operator who indulges in day trading is known as a day-trader.

In the US, based on rules by the Financial Industry Regulatory Authority, people who make more than 3 day-trades per 5 trading days period are termed as pattern day-traders and are required to maintain $25,000 in equity in their accounts.

Day-trading as a career

Day trading is a good source of side income but can it be chosen as a career, and that also one with a bright future. The answer is yes. It is a lucrative career if you do it properly.

Day-traders are of two types:

  • Retail Traders – Often known as individual traders, they buy and sell securities on their own name.
  • Institutional Traders – They buy and sell securities on behalf of any instituition or a particular group they are representing.

Important point is that you cannot become an institutional trader directly.

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You have to start individually as a retail trader and as you’ll gain experience with time then either you can apply as an institutional trader in any of your favorite institutions like insurance companies, exchange-traded funds, etc. or any company will approach you itself if you are doing extremely well and it wishes to get benefitted by your trading talent and expertise.

The good news is the annual salary of top traders is $125,500, being $10,458 monthly pay. While the average annual salary is $72,004, being $6,000 monthly pay. So, a small start like even $250, and experience by the time can make you achieve great heights.

So the information given below will help you to start as a retail trader.

Make it very clear that day-traders are typically well-funded. They use a high amount of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies.

Here, the main aim is to maximize profit which is mostly done by investing more and more for short period. It is legal gambling so the more you are willing to take risks, the more are the chances of getting higher profits.

But as a beginner, you can start with a small amount to get experience.

To start, you require:

  • Capital
  • A day-trading friendly app
  • A reliable source for live quotes

Capital

You can start trading with $250 even. Once you start making profits and gain confidence, you can invest more.

As you wish have opted for trading as a career and not just as a hobby. So, surely you will trade once, twice, or even more daily.

And doing this will make you fall in the category of patter-day traders as given above. SEC’s pattern day trading rule states that accounts with less than $25,000 at the end of the day are limited to 3 round-trip trades per 5 day period.

Once your 3 round-trip trades per week are exhausted, your broker must cut off your trading privileges until the next 5 day period begins or you need to make a deposit into your account to bring it back to $25,000.

The ratio for maximum leverage is 2:1 but brokers permit 4:1, i.e. a day-trader can buy $100,000 (4*leverage) with the legal minimum of $25,000 as long as half of those positions are exited before the market closing.

Day-trading friendly apps

Technology has made day-trading reach great heights. Buying and selling stocks within possible only when you have a fast and user-friendly trading app.

Here is a list of some apps you can use to trade comfortably-

  • RobinhoodBest for beginners and mobile traders. It allows traders to buy and sell stocks without commission charges and $0 minimum deposit along with it.
  • E*TRADE – Best for mobile trading. It is built with easy to use features and tools. You can execute trade for stocks, ETFs, options and futures on a single trade ticket.
  • TD Ameritrade – It lets you trade forex, stocks, options and futures. It has user-friendly tools and features with more than 300 technical charts and indicators.
  • Webull – Best for intermediate traders and investors. It is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
  • Moomoo – Best for active, advanced and cost-concious traders.
  • TradeStation – Best for professional traders who require a highly technical platform. Preferred for futures trading.
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Reliable sources for live quotes

To day-trade stocks, you require firm, dependable news on the ground of which you can make correct decisions to buy and sell stocks at the right time to earn maximum profits.

The best sources for free online stock quotes are:

  • NASDAQ – It contains free stock quotes for almost all publicly traded corporations in the United States. Also, the data is updated in real-time.
  • FreeRealTime – It offers much more than just quotes; it shows an unbiased and comprehensive review of both the domestic and international market on a daily basis.
  • CNBC – Along with free stock quotes it offers market indexes for both domestic and international markets. Also, it can be accessed via television.
  • Yahoo Finance – It offers watchlists that list the stocks that hedge fund managers are buying and selling most on a particular day. If you wish to trade in cryptocurrencies then it offers a list of the most volatile cryptocurrencies as well that have been traded most in the last 24 hours.

Characteristics of day traders

To come out with flying colors in the sky of trading, you need to build or develop some basic characteristics-

  • Discipline – Traders show tight disciline when it comes to trading approach and what they do in maket hours.
  • Sharp-witted – Day tarders just have some minutes to play, so they cannot be cogitative and panicky. After seeing an opportunity to trade they have to take a firm decsion within seconds, firm enough to act upon it.
  • Independence – Most day traders work alone at home, having full authority over their own trading account.
  • Interest in the markets – Being really in intrested in the work you do increases your productivity. So, same applies here, tarders are so much into the markets that sometimes they even forget that where they are sitting while analysing charts.

Crucial intra-day strategies

Strategies to a trader are like wheels to a car. So, downlisted are some important strategies used by day-traders.

  1. Momentum Trading Strategy – Based on trends and speed. In this, you have to buy stocks that are rising and sell them when they look to have peaked.
  2. Breakout Trading Strategy – Based on timing. It is one of the most common trading strategies. It involves, identifying a key price level you expect the price to break through, and then buying or selling at that price in order to make a profit.
  3. Reverse Trading Strategy – Using this strategy can give you high profits but it is very risky at the same time. It involves going against the trends. It requires the correct identification of pullbacks at correct timing. The reward is that trading will snap back and you will make good profits. Not recommended for beginners.
  4. Gap and Go Trading Strategy – Done on the grounds of news. It involves finding stocks that do not have pre-market volume and open at a gap from the previous day. If the gap opens higher then it is known as gap up and vice versa. Capable of giving short and quick profits and not much risk.
  5. Moving Average Crossover Strategy – Based on a potential change in trends. Involves studying whether the price is going above or below a moving average to spot a potential change in trend.
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Is day-trading profitable?

To be honest, trading is highly risky. On the other hand, we know that huge risks can lead to huge profits. Day-trading is profitable only when you take it seriously and do it properly.

This includes doing proper research before buying or selling stocks, understanding and executing strategies properly.

If you are choosing to trade as a career then probably you would like to be an institutional trader with job security.

So the average salary (basic) offered to an institutional trader is $50,000 to $70,000 along with the bonus of 10-30% of profits realized.

Like any other job, here also you are paid on the basis of your experience and talent (to trade). As experience will increase, salary will follow.

But if you want the whole share of profit realized then you can keep going as an individual trader. For sure, this means more profits but more risk at the same time.

Final thoughts

To wind up let’s look at what information you have gained so far,

Hope we were able to provide you with the desired, useful knowledge. We would like to answer your queries if any then the comment box is open for you.

If you found this article worth reading then do share it with the successful day-traders of tomorrow. All the best. GET. SET. TRADE!

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