The last couple of years have invited a bear market with high volatility, which isn’t ideal for the majority of investors. However, if you’re looking to get started with a career in day trading, the low-value market and volatility present the perfect opportunity. After all, what better way is there to learn how to manage risk than navigating the current market? Below, we’re going to tell six things to consider when starting a career in day trading.
What Your Trading Goals Are
If you’re serious about becoming a day trader, you’ll need to set a series of goals to keep your efforts grounded. There are several areas to set goals around including:
- Profit margins. Work out how much profit you want to earn, but make sure you’re realistic.
- Effort and rewards. Keep yourself motivated by setting up a system to match your efforts with appropriate rewards.
- Trade reviewing. Analyzing trades offers a key learning point, so turn this practice into a goal, which will eventually turn into a habit.
- Risk management. Without setting risk management goals, you’ll lose a lot of money early on.
Whether to Keep Your Regular Job
Commencing your day trading career path doesn’t mean you’re immediately going to make enough money to pay for your lifestyle. Therefore, if you’ve got a regular job, it may be worth keeping hold of it and turning day trading into a side hustle. After all, there’s no point saying goodbye to a perfectly good, stable income.
What Strategy to Use
To limit the risks associated with day trading, you’ll need to create a strategy that suits your goals and style. If you do a quick Google search, you’ll find plenty of documentation about day trading strategies. Start by reading through the different strategies, and then start communicating with other day traders to find out what works for them – “if it isn’t broke, don’t fix it”.
Which Trading Platform to Choose
After creating a set of goals and building a strong strategy, you’ll need to get yourself a little practice. The best way to do this is by finding an online trading platform that comes with a free dummy account, which allows you to execute trades without risking real money. This system is called paper trading, and it dates back to the days before technology.
Set a Strict Budget
Every successful day trader suffers losses, it just comes with the territory. When deciding how much you’re willing to spend when day trading, you’re essentially asking yourself how much money you’re willing to lose. There’s no one-size-fits-all when it comes to the budget setting for day trading. However, according to FINRA.org, pattern day traders should maintain a minimum equity of $25K. According to some strategies, it’s recommended not to spend more than 2% of your portfolio total in a single trade.
How to Plan Time Off
Just like any other career, it’s important to take time off when you’re day trading. However, given the nature of the markets, this can be pretty tricky. Fortunately, there are a few days throughout the year when the stock markets come to a standstill, so make sure you find out what they are and keep them in mind when planning time off. As well as this, you can use several automation features on the majority of trading platforms.
Starting a career as a day trader doesn’t come with traditional job security, so it’s important to make sure you’ve considered all of your options, which includes goal setting, risk management planning, finding a suitable trading platform, and knowing when the perfect time for a holiday is.
