It is a myth that a significant amount of capital is required to commence trading as a day trader. It is possible to start with a minimum of $500. You do no not need to have a fancy degree in business to be a day trader.
In short a day trader can be defined as an individual who buys and sells shares within the same day. There are other financial instruments which can be bought and sold the same day such as options, futures, currencies but this article relates to trading shares as a day trader.
It is important to remember that day trading is not a guaranteed way of making money. There can be gains and losses. If you don’t want to incur losses day trading is not for you. You would be better off with a term deposit.
To ensure day trading is for you it is best to open a practice account which allows you to trade virtual money on a stock exchange. Many online brokers allow you to do this.
To get started it would be preferable to open an account with an online broker. The beauty of online brokers is that they offer discounted brokerage as opposed to full service brokers who charge significantly higher brokerage. The cost of online brokerage starts from around $9 and can be as high as $60 depending on the amount traded.
It is important to remember with online brokers they do not offer personal advice but allow you to access their research which may provide general stock recommendations. if you find an online broker a little overwhelming it is possible to conduct day trading using a full service broker who can provide personal advice relating to your financial situation but you may find it difficult to break even with the high brokerage fees. Also, there is no guarantee that the stocks they advice the client to buy will rise in price.
It is vital to have an understanding of technical analysis which enables the trader to forecast future price movements based on analysing past price movements. With online brokers they often have charting tools for to you use but you must have a basic understanding. There are countless books on the market which can help you to understand technical analysis but these books will not advise you which stocks to buy. Also, there are numerous sophisticated charting software programs which allows the user to download end of day data which can be used to identify chart trends. You will need to subscribe to a data feed to enable to access the data.
With trading shares there is always going to be an element of risk due to market volatility. It is vital to have a stop loss in place where if a stock was to decline say 5% in value there is is an order placed to sell the stock to prevent an even larger loss.
In summary day trading be a great way to generate income but remember to do your research.