Investing in the stock market is one of the best ways to create passive income over time if you allocate your money well. Similarly, many people enjoy picking individual stocks to trade here and there to see how they do, and often are successful.
However, no amount of moderate and infrequent investing is comparable to the challenge that is day trading full time. There’s a reason why it is referred to as ‘a hard way to make an easy living.’ That being said, it is also very attainable as a profession with proper education, risk management, and dedication.
Read below to see if you have what it takes to day trade for a living.
There is no such thing as a free lunch. That is to say, if making money was guaranteed in the stock market, everyone would be a day trader. However, with proper risk management and the right toolkit, you can give yourself a great chance to start trading and become more successful with experience. Eventually, you can even be part of the small percentage of day traders who make money long term!
These words of caution aren’t to deter you from getting into trading- you just have to understand what is at stake. People who take on too much risk too fast often lose money, get burnt out mentally, and frustrated emotionally. In order to avoid these downsides, we recommend the following guidelines.
- Only trade with money you can afford to lose. Do not put your financial well-being at risk, especially early in trading.
- Adhere to the 2 percent rule with the amount you trade out of your portfolio, and take profits without being greedy.
- Do not commit to full-time trading until you have proven to yourself that you can do it over a long period of time profitably. Scaling your trades is not just raising the amount of shares you buy; it takes mental fortitude and the ability to trade in all sorts of markets.
Research every stock you want to trade before doing it, understand its outside factors, and make a plan. Once you make that plan, trade that plan.
It is not always possible to stick to these rules rigidly. However, until you have the requisite experience to understand why they can and should be broken, it’s best to follow them. Even if you have differing opinions on some of them, make sure discipline is the number one thing you bring to the table in trading.
The Learning Curve of the Stock Market
If you ask many people who have their money invested in the stock market via retirement funds or casual long-term investing, they will have very little clue about how it actually works. The common perception is that you buy some stocks, hold them, and they either go up or down in value, but usually up.
This generalization might work for some, but if you are looking to trade full time from home and make a living, the stock market will come at you quickly. This is why you are reading this piece; to become more prepared and understand the barrier to entry. A common question is “how much money do you need to start trading?” This depends on a few variables, such as how much can you leverage without risking your financial well-being, how much risk tolerance do you have, and what are your goals?
However, a more functional approach is to realize that even if you start with $1,000 and have small percentage wins every day, your capital can grow immensely quickly. Though you won’t have all profitable days, learning the proper technical and emotional aspects of trading can vault you to new heights before you know it.
One caveat is that trading stocks is zero-sum, and it is not just other individual day traders you must contend with. You are in an ecosystem with hedge funds, institutional traders, market makers, and global macro and micro events that all influence the trades you make. Sometimes, the stock market ebbs and flows with no rhyme or reason, and that is hard to contend with as well.
When you factor all these variables in, you will need to dedicate yourself to a financial education, global awareness, and a disciplined system that works for you in order to succeed long-term. Luckily, at StockAbility™, our team is comprised of people who specialize in all those things and have experienced them firsthand.
Lifestyle and Hours
In the modern world of online stock trading, the market can essentially be open from 4 am ET Monday until 8 pm ET Friday. If you were to venture into Forex and cryptocurrency trading, you could essentially trade 24/7. However, this is not recommended in any way- in fact, you should do your best to normalize a routine, choose the best hours for trading, and be as serious as possible about your craft.
Many successful day traders only trade during the peak volume hours of the day- 9:30 am ET to 12:00 PM ET, and 3:00 pm ET to 4:00 pm ET. This strategy doesn’t have to be yours, and it is actually encouraged to trade through the normal market hours for new traders. During these hours, you should experience what all portions of a trading day are like, and learn what works for you.
Within that full trading day, you will also want to figure out what keeps you physically and mentally sharp. In a field that requires quick windows of time to process information and razor-sharp decision making based on those variables, you should aim to be your best in every way. Plan healthy meals, exercise, and get enough sleep. Because of the available trading hours, a common pitfall is to alter your sleep schedule in a negative way. Avoiding this is key to a long-term healthier trading experience.
Earning Ability of Day Traders
As a profession in the financial industry, day trading is often portrayed as a millionaire’s game, and always glamorous. The reality is that there are many different levels of successful day traders that range from the mid five-figures all the way into many millions. Much like any other risk-laden investment venture, the skill is in moderating risk while you scale.
In order to accomplish this goal without putting your financial future in danger, building a secure knowledge and technical base will be your strongest foundation. From there, you should be setting goals, tracking your progress, and assessing how you need to refine your trading process. The stock market is never static, and though trends are important in trading, the market itself never truly repeats.
Free Day Trading Course to Get Started
At StockAbility™, we offer financial education to people who want to empower themselves through day trading and investing. Our programs include specific courses on the beginning portions of trading for a living and how to accelerate your progress. If you are looking to become part of the ambitious few who can be full-time stock traders, sign up for our one day complimentary course today — it’s worth the investment.