Can I Become a Day Trader?
Can I Become a Day Trader?
Written by Katie Gomez
If you have been feeling a bit bored with the same 9 to 5 office job, it’s human nature to look for something different. Are you looking for something more exciting? Do you crave the freedom of working from home? Do you need a sense of autonomy found in working for yourself? Does it sound like I am reading the checklist for your dream job? Join the club.
If you are serious about fulfilling these goals and have done your research, you’ve probably narrowed your search to a few careers. The first thing that comes to mind for most people is becoming an entrepreneur, which is impossible without an idea of what you want to create. Next, most people turn their attention to the stock market.
Over the last few years, social media content has made trading seem more accessible, exposing people to the stock market and potentially lucrative results of day trading. These influencers try to make you believe that you can succeed just like them. But without the requirements necessary to become a trader, you might as well try your luck in entrepreneurship. If day trading were easy, everyone would be doing it.
Day trading is glamorized on social media because it’s an exciting way some traders find great success in trading. Although many of these influencers are not lying about their wealth or their path to it, they are often spreading false information and false hope so sell you their program.
So if the answer is not some influencer’s program, what do you need to become a day trader? Well, you need to answer a few questions first.
- Do you have the time?
If you want to commit to day trading, it will have to be your full-time job and primary source of income. If it is not possible for you at this time to quit your job and go full into day trading, start with swing or retail trading.
Day trading is not for everyone; you need to be sharp, logical, and focused when making trades. You must be on red alert because you are buying and selling stocks in a matter of minutes. Your brain has to stay focused from the moment the market closes until your last sale comes at the end of the day.
- Do you have the money?
You need a certain amount of money to have a brokerage account and become a day trader. The pattern day trading rule (PDTR) states that you must have at least $25k in your account to day trade. Unfortunately, this rule stops a lot of aspiring day traders early on in their path.
While the PDTRmay be disheartening, it is essential to understand: brokerages created it to ensure that they would not go into debt on account of your trades. Day trading is the most lucrative form of stock trading because it is also the most expensive. Unlike retail and swing trading, which allows you to trade sporadically, with day trading, you are constantly buying and selling stocks throughout the day, and cashing out before the close.
For instance, even though it looks as though your trades instantaneously happen, the actual settlement process does not take place until about three days later via your brokerage transfer. Therefore, since day traders turn around and buy more stock after selling daily, they need that extra cash to allow the trade to settle.
Moreover, the point of the PDTR is not solely to isolate the practice of day trading for the rich to get richer, it is to save their asses at the brokerages. Day traders need that 25k because it simultaneously acts as a form of collateral and personal wiggle room when making those daily trades. I know it sounds unfair that before you can make money, you have to deposit a large amount, but it is no secret that the stock market has never played fair. You have to pay to play.
So, before you jump the gun and quit your job to become a day trader, ensure you have at least 25k ready to use in your savings. This money should never be “scared money” (money you need to survive). Your brokerage account money is from the money you have after you pay bills and obligations. This rule goes for any trader that gambles money they need in the market: if you need it, save it.
3. Do you have the correct expectations?
If you have committed to spending the time and money to become a full-time day trader, you are well on your way; but first, you have to jump over one more hurdle: realistic expectations. You would think that devoting your well-earned time and savings would be enough to start making money as a day trader; however, it is never that easy.
The day trading lifestyle requires you to be patient with the inevitable learning curve. If you need to make money right away to stay afloat, day trading is not the correct route for you at this time. Again, you must ensure you are financially comfortable (not using scared money or distracting yourself with another second job) to set up your brokerage account and start day trading.
The learning curve for new day traders can range from 4 to 12 months, averaging around six months. How long it will take you depends on how much effort and time you put in, absorbing and learning from every mistake in the process; until you know how the market thinks and can predict moves before they happen.
It is not as easy as Tiktok influencers make it seem, huh? Day trading is not for everyone; it is for the trader who is strong-willed, patient, dedicated, ambitious, and maybe even a little crazy. If this article scared you away or turned you off day trading, you are not alone. That is why swing and retail trading exist.
You can still earn good money with the right tools, instinct, experience, and skill with no brokerage account necessary. However, you might have to adjust your expectations regarding the profits you will yield. To sum it up: if you are willing to dedicate your time and energy to trading, have sufficient funds to begin, and can check your emotions to keep expectations to a reasonable level when starting, you will make a great day trader.
For more information on becoming a day trader, visit www.trade-ideas.com for more insight to help get you started. The more knowledge and resources you have before beginning will help your experience seem more manageable. Good luck!