The allure of day trading is undeniable – the freedom to be your own boss is the biggest pull for most people, not having to worry about things to do for startups to thrive or survive. Besides, high profits have great potential, and the market always induces a big adrenaline rush. But before you quit your job and decide to dive into the trading world, you must lay the groundwork.
We’ve drafted a roadmap to help you establish your day trading business as a full-time income source:
1. Check Yourself
Before becoming a day trader, you should examine yourself, testing for good qualities and bad ones. It is always good to do a little introspection before starting work on a business plan.
As a rule, day trading is a profession that requires you to have discipline, resilience, and a cool head under pressure. This is because you are going to be working for yourself, by yourself without a boss to push you and spur you on. It is easy to get distracted without these qualities. While many people have ventured into day trading to make a quick buck, it’s not a get-rich-quick scheme.
You must be honest with yourself – how much are you willing to lose, and how capable are you of handling yourself when you suffer big losses? Think about your ability to manage your emotions, especially when things are not going according to plan. Lastly, weigh your ability to stay tuned in for long hours, staring at boring charts. This will come in handy because studying charts and graphs carefully could be the difference between you making money or losing.
2. Get Access to Sufficient Tools
In order to become a successful day trader, you will need to rely heavily on your tools. The first and most important step is finding a good brokerage app. According to Gaurav Roy, there are multiple apps available on the market, and you will need to find one that matches your trading style. He lists apps like eToro and Pepperstone as the top two choices among many day traders.
When starting out, you might consider a platform with low commissions, which may mean less risk. Make sure that your app is user-friendly and that it allows you to execute orders quickly. Advanced charting capabilities are also a plus in an app because the feature will give you much-needed technical guidance.
Of course, a good, strong app is not worth much if you are lacking a stable and high-speed internet connection. The stakes are even higher in day trading because a dropped connection at a crucial moment could mean missed opportunities and losses.
Over time, you could consider investing in multiple monitors to improve your efficiency. You can also create a dedicated workspace with a clear view of all your charts and market data in order to improve your focus.
3. Learn, Learn, Learn.
As a new trader, you probably don’t know much about financial markets, so following communities like “Warrior Trading” is a good place to start. While experience is the best teacher, it could take many years to gain adequate experience, which can help you gain money. Rather than walk blindly into a bull run when things are bearish, you can gain a deeper understanding of the trading world by actively pursuing an education, learning about the market itself, how it’s influenced, as well as how best to excel in it.
The easiest way to learn is to devour books, YouTube tutorials, and articles as much as you can on the subject. Conduct research on reputable websites, like Forbes, and ask questions in dedicated online trading communities, finding out tips and tricks from others in the field where their win-lose ratio is good.
You can also take online courses to equip you with the skills to read charts, identify trends, and predict prices. You will also learn to consider factors like a company’s financial health, industry trends, and economic conditions. Courses also acknowledge the human being in you by teaching you how to manage fear, greed, and other emotions that can cloud judgment and lead to costly mistakes.
4. The Power of Organization
Any business without a solid plan is bound to fail. As you start planning your business, make sure to create a well-defined trading strategy. Your plans should encompass your newly acquired trading strategies, knowledge of risk tolerance, market preferences, and time constraints. This strategy should outline your entry and exit points for trades, how you will size your positions, and the specific risk management techniques you’ll employ, such as stop-loss orders to limit potential losses.
5. Demos First
The day trading market is cutthroat, and walking in, you don’t want to spend real money while you’re still getting your bearings. Demo accounts or paper trading allows you to learn valuable lessons without risking your hard-earned capital. Most brokerages offer paper trading accounts that mimic real-world trading with virtual currency.
Use this platform to refine your strategy, test your discipline, and gain confidence before putting real money on the line. Paper trading allows you to experiment with different strategies while you build your technical analysis skills, and while getting comfortable with the mechanics of order placement and position management in a risk-free environment.
6. Practice Discipline
The market is seductive, worth around $32 trillion, and has many alluring options. However, you need to ensure you have set up a plan each day so you do not get a bad run through a lack of daily discipline. Over time, you will be tempted to deviate from your well-thought-out plans in the heat of the moment. Remember, though, that consistency is important for long-term success in day trading. Following your trading plan religiously, even when emotions run high, helps eliminate impulsive choices and ensures you’re approaching the market with a clear and objective mind.
7. Start Small
In the beginning, only allocate a small percentage of your capital per trade, and always use stop-loss orders to limit potential losses. A common rule is to risk no more than one to two percent of your account on a single trade, even if it looks like it might yield big bucks. A “smaller is better” mindset will help you survive losing streaks and will ensure you have enough capital to capitalize on future opportunities.
Don’t just limit yourself to trading just one asset class or a handful of stocks. Spread your capital across different markets and instruments to mitigate risk. This way, a downturn in one sector won’t wipe out your entire account.
8. How Are You Performing
A good practice is keeping a detailed trading journal (good options: Edgewonk, Tradezella, and Tradervue). Record your trades, wins, losses, and even the rationale behind each decision you make. Regularly review your trading journal to identify patterns in your wins and losses. Your journal will allow you to analyze your decision-making process and pinpoint areas for improvement. By tracking your performance, you can gain valuable insights to refine your strategy and make better trading decisions in the future.
9. Keep Your Work At Work
Treat day trading like a business. Having a separate workspace helps you maintain focus and reduces distractions. Despite working for yourself and not going out to the office, treat day trading like a regular job and set specific hours for market analysis, trade execution, and reviewing your performance. Sticking to a schedule helps you maintain consistency and avoid burnout. Finally, keep your business finances separate from your expenses. This allows you to track your trading profits and losses accurately.
Conclusion
Global economic events, political developments, and industry-specific news can significantly impact market movements. Be aware of these factors and how they might influence the assets you trade.
As you gain experience, you’ll discover new technical indicators and trading strategies. Continuously research and experiment to find ways to improve your analysis and decision-making. Market conditions can change rapidly, and a strategy that worked in the past might be ineffective today. Be flexible and willing to adjust your approach based on market trends and your own evolving risk tolerance and your business is sure to thrive.
