From the outside looking in, the perks of making a living as a day trader are clear to see. First of all, traders don’t have a boss, can choose their hours, and have the potential to earn a lot of money from the comfort of their own home. Oh, and who wouldn’t love it if their commute to work consisted of walking from the bedroom to their desk every day (in their pajamas)?
Considering all this, why isn’t every man and his dog day trading for a living? Well, the answer is simple – it’s just not that easy. However, that doesn’t mean that with the right amount of dedication and the willingness to learn an entirely new skill, the average joe can’t make it as a day trader too.
Can Anyone Day Trade for a Living?
Despite its difficulty, day trading is a learnable skill for just about anybody. After all, the barriers to entry are relatively low, and the amount of available learning material increases year on year. Nowadays, it’s even possible to master the basics for free by watching videos and reading articles online.
With that said, if someone is serious enough about taking a shot at becoming a full-time trader, here are a few of the essential things the job requires.
A Strategy
First up, every trader needs a strategy. However, while this may sound strange to hear, learning a new strategy isn’t the most challenging aspect of mastering the markets.
Fortunately, there are many different strategies that are simple to learn (for free) – it’s just a matter of finding which one best suits each trader’s style. From then on, it becomes a process of slowly refining it over a long period of time and becoming more astute to how that strategy interacts with the varying assets on the markets.
The thing is, most day trading strategies rely on charts, patterns, and technical indicators to make informed predictions about how the market will move. This information then enables people to make a large quantity of low-value trades that add up to a considerable sum in the long run. This is why it’s important not to overcomplicate and over-elaborate the strategy.
Self-Discipline
Day trading is all about consistency over time. At the crux of it, traders must turn up every day and make correct decisions based on solid logic and data. However, that’s far easier said than done for most people.
In fact, having self-discipline is one of the primary reasons why only approximately 5% of day traders are profitable. To see how that works, just break it down into four key categories.
Patience
Imagine sitting in front of a screen for hours on end, constantly viewing the charts and crunching the numbers, waiting for the perfect trading opportunity, only to not even place one trade for the whole day. Well, that’s precisely what many traders have to do if they want to be successful.
Many beginners make the mistake of overtrading, as they feel they should be more active in the market. So they make the mistake of opening low-quality positions that cost them money. In order to be a success, patience is one of the most important tools in a trader’s belt.
Emotional Control
For traders, there may be some days where they don’t earn any money at all. In fact, they may even experience losing weeks, where they spend 40+ hours in front of the screen and walk away with a negative.
A lot of people can’t handle it when that happens, and they try to chase their losses and recover their trading balance. However, chasing losses like that almost always ends up badly. And as any successful trader will be quick to say, traders should never trade based on emotion.
“The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder.
Risk Management
Knowing when to take wins and cut losses is paramount. That’s why risk management is everything when it comes to trading. If traders continually overexpose their trading balance to high-risk scenarios, it will eventually lead to the ruin of that balance. Making a living from the markets is a marathon, not a sprint.
Motivation
Many people dream of being their own boss and ditching the 9-5 lifestyle. However, what they don’t realize is just how hard it can be to get motivated every day and turn up to work when nobody is watching (especially when in the midst of a losing streak).
For people who work from home, nobody is going to give them a hard time when they slack off. There is no boss to shout at them for being late, and nobody will care if they don’t turn up. While this may sound like a positive to the people who are in full-time employment, it’s important to recognize that it is a double-edged sword.
Traders must have the ability to continually motivate themselves to do their job and perform at their best because, at the end of the day, the buck stops with them.
Starting Capital
As the old adage says, spend money to make money, which is certainly true when it comes to trading. Now, the amount of money needed to get started and open a trading account largely depends on each trader’s country of residence and the laws that govern that particular jurisdiction.
For example, in the USA, this figure is $25,000. Unfortunately, it won’t be possible to open or maintain a day trading brokerage account with any less than this, making this a very significant hurdle for most people.
Final Word
Many people wrongly assume day trading requires immense skill and experience in the financial markets; however, StocksToTrade says that simply isn’t true. In many ways, becoming a successful trader is just as accessible as any other skilled profession. It just takes time, patience, a willingness to learn, and a whole lot of self-discipline (which is where the vast majority of people fall down).
