Starting a business as a day trader is a great career to embark upon, but like any professional path it comes with its potential pitfalls and difficulties. You can operate from the comfort of your own home and are working for yourself, but that also brings a lot of pressure and the requirement for high self-motivation. If you are considering day trading, this beginner’s guide to starting a business in day trading outlines the key steps you need to consider before you begin, from getting the right equipment to choosing a trading market, when to trade and how much risk to take.
It’s possible that you have already decided which market you are going to trade in, but there are a few options to consider. For example, you could trade in shares in certain companies, cryptocurrencies, indices or the forex market. There is plenty of potential for profit in each market, but in the beginning of your career it’s best to focus on a single market.
To become a day trader you will need some essential equipment, starting with a laptop or computer. It should have sufficient memory and a fast processor to ensure you can run your live trading software without interruption as this could cause you to miss out on profitable trades or get stuck in less favorable ones. You will also need a quick and reliable internet connection for the same reasons. Your next step is to choose a trading platform which will suit your type and style of trading. It’s best to download a few and trial them before choosing one to use. Finally, you will need a broker to facilitate your trades. They will charge a commission for each trade so look for low fees balanced with experience and excellent support.
Consistency is key in day trading so it’s often advisable to conduct your trading during the same hours every day. Most stock markets only trade for a specific 2-3 hour period at a time depending on the markets they are trading in. A popular time to trade is the first 1-2 hours after the market opens as it is often the most volatile period, and towards the end of the trading day there are often more significant shifts.
Now you have chosen a market to trade in and have your software and equipment in place, it’s time to consider how you will manage trading risk. There are 2 sides to trading risk known as trade risk and daily risk. Trade risk is how much you are comfortable risking on each individual trade. A good benchmark is never to risk more than 1% of your capital on a single trade. You can do this by choosing an entry point and establishing a stop loss point which will automatically remove you from the trade if the loss will exceed that point. Daily risk is setting a daily loss which you can manage such as 3% of your capital. When you have lost 3%, you stop trading for the day and start again tomorrow.
It’s not possible to learn everything there is to know about day trading strategies when you begin, so don’t waste your time trying. Instead, focus on finding a single pattern which repeats enough to enable you to make a profit. Find a strategy which you can use in a demo account until you get used to the rhythm on trading. You should practice for at least 3 months before attempting live trading with real money.
A lot of day traders see a drop in their performance when they change from demo to live trading. While demo trading provides essential practice, it cannot give you a realistic experience in terms of fluctuating markets or the pressure of dealing with real money. It’s important to be aware that a drop in performance is natural when you start live trading and that you will need some time to adjust, take control of your emotions and hone your strategy. If you want further resources or help, consider forex trading brokers.