How to Day Trade for a Living

Day trading has become a popular activity in the United States and around the world recently. While the industry was growing rapidly a few years ago, the Covid-19 pandemic helped to supercharge this growth. This happened as more people were staying and working from home and as most asset classes like stocks and cryptocurrencies rebounded. In this article, we will look at what you should do when you want to become a full-time trader. 

What is day trading?

Day trading is the practice of buying and selling financial assets with the goal of making a profit. There are many assets available that you can day trade, including stocks, currencies, cryptocurrencies, commodities, and bonds, among others.

Day trading is different from swing trading and investing. For one, day trading involves buying and selling assets within a day. Day traders don’t prefer leaving their trades open overnight. On the other hand, swing trading is the practice of buying and selling these assets and holding them for a few days. Swing traders identify patterns, allocate capital, and wait for the trades to manifest.

Investors, on the other hand, use what is known as the time in the market. This is where they initiate trades and then hold them for a few weeks or months. This practice has been practiced well by the likes of Warren Buffett and David Einhorn. 

Day traders are known for initiating several trades per day. Some, who are known as scalpers, often initiate tens of trades per day. Their goal is to make smaller profits per trade.

How people start day trading

With this in mind, the next thing we will look at is how you should start your trading career. Like in many industries, people follow different paths in their trading journey. There are those people like me who start trading in their college hostels. These people are intrigued by the financial industry, and then they start giving it a try. Indeed, this is the path that Ken Griffin, the billionaire founder of Citadel, took to start his company. 

Other people take a more conventional route to become professional traders. They go to university and study finance and then find a job at an investment bank or a hedge fund. There, they are guided by other professional traders.

There are other people who start their forex trading careers by accident. These people start trading as a way of making some extra money. 

How to start trading for a living

You should follow several stages when you want to become a full-time day trader. 

Trading education

First, regardless of the method you use in day trading, we recommend that you start the journey with education. Fortunately, you don’t need to go to a university to learn how to day trade. Personally, I did not go to a school or attend a course to learn about trading.

There are many free resources available that will teach you about trading. For example, there are free websites like BabyPips and DailyFx that have a wealth of information about trading. BabyPips offers trading lessons tailored to all people. You can take advantage of these resources to learn more about trading.

Alternatively, you can enroll in one of the many online trading courses that are offered on platforms like Coursera. These courses will educate you about what forex trading is and introduce you to some strategies. 

Most importantly, you could use free platforms like YouTube to learn more about trading. On YouTube, you can follow people who provide these lessons.

Strategy development

The next thing you need to do when you want to trade for a living is known as strategy development. Professional traders use several approaches to make money in the market. Broadly, there are several ways such as scalping, algorithmic trading, swing trading, pairs trading, and price action analysis.

Excellent traders focus on one strategy instead of trying to become a jack of all trades. Therefore, you should learn about these strategies, identify the one that pleases you, and then work on perfecting the strategy. 

Fortunately, most forex brokers provide a demo account to their traders. A demo account is a market simulation that is based on real-time data. The only difference it has with a real account is that it has fake money. 

Therefore, you should spend a few months in a demo account to test your strategy. This period is often a boring one since you will not be making any real money. However, in my experience, spending this time in a demo is usually worth it. Indeed, many people who fail in forex trading do so simply because they did not spend time in a demo account testing their strategy.

Start trading

The next process is where you equip your trading office and start trading. Here, you should buy quality trading hardware and then start trading. You should ensure that you follow your trading strategy to become successful.

There are several things you should do to ensure that you become a successful day trader. First, ensure that you mitigate your risks since it is possible to lose a substantial amount of money in the market. Some of the most popular strategies to mitigate these risks are using small leverage, not overtrading, and always having a stop-loss.

Second, you should create a trading routine that works. For example, you can set a specific time when you will be trading. You can decide to trade during the European or American sessions, which have more liquidity than the Asian session. You can also decide to trade emerging market currencies instead of G20 countries. Having a routine will make your trading more fun and effective.

Summary

Trading for a living is a thing that many people desire. Unlike other ventures, all one needs is a computer and an internet connection. The profits can be significant since it is possible to even double your funds within a few days. In this article, we have looked at some of the strategies to use and how to reduce risks.