Trading Strategies > Intraday Trading > How To Become A Day Trader

​How To Become A Day Trader

​The Practical Guide To ​Day Trading

​Most people who get into ​trading want to​ eventually ​be​come full time day traders.​

The ​aspiration ​is to ​​make money daytrading from ​home and be ​your​ own boss.​

That's the dream, ​right?

how to become a day trader

​The reality, however, is not so encouraging. ​​​Research ​has ​shown that among ​those ​who attempt to day trade for a living, only a small ​group ​​is ​able to pull it off​.

become a day trader

​The implication is that if you want to succeed, you ​must ​approach ​day trading differently from ​most people.​

​How To Day Trade For A Living

​The first thing to know is that ​there's no ​straight-forward ​procedure to day trading​.

​Ultimately, ​it​'s a form of​ entrepreneurship​. And ​just like how there's no ​fixed ​path to ​​​become a successful entrepreneur, there's also ​no ​fixed ​path to ​become a profitable day trader.

​This being said, there are guidelines that ​will keep you on the right track, ​and ​these are the ​points I'll be covering in this guide.

1. ​Conduct a Self-Assessment

​Day trading is often portrayed as a fun and exciting ​path to ​easy money​.

In ​truth, however, it's ​a highly stressful activity both mentally and emotionally.​

​Since ​day trading​ is about​ opening and closing​ trades within a few hours​, there is little room for​ ​mistakes.

​Success in ​this business ​requires:

  • ​Extensive ​research,
  • ​Meticulous ​planning, and
  • Years of ​market experience

You will not find a truly successful day trader with less than 5 years of experience.

At the very ​minimum, ​therefore, you should only consider ​this path if you're able to commit​ ​to at least​ ​2-3 years ​of dedicated practice.

​In addition to this, you should also consider ​whether your personal traits are suitable​ for a career in ​day trading.

​​Personal Traits

Successful day traders are:

  • Highly logical
  • ​Highly self-aware
  • Hardworking​
  • ​Decisive
  • Risk-takers
  • ​Quick to adapt to changing circumstances
  • Self-confident
  • Self-motivated​
  • ​Able to ​rapidly admit ​mistakes
  • Able to tolerate long periods of stress and emotional discomfort

​What's more, you can't learn to day trade from a book. No amount of theory can fully prepare you for the ​struggle you'll face in your​ journey to become a day trader.​

You can get ​mentorship and guidance, ​sure, but ​for the most part you are​ on your own.

So ​you ​must have the right mindset going in - be prepared to work hard, take risks,​ suffer losses, and willing to learn from mistakes.

Access to ​​Capital

​Lastly, to ​day trade for a living​ you need to have access to sufficient capital.​

If you're wondering how to become a day trader with $100, here's the straight answer: you can't.

​Of course, ​there's no lack of ​​people ​on the internet ​that will tell you ​otherwise - ​they'll say you can make $300 a month day trading with just $100, or something along those lines.

If you're gullible enough to believe such claims, I can't ​do anything for you - ​you'​d be ​the perfect target to ​get scammed.

​Now don't get me wrong - you ​CAN ​start small ​at the beginning, but you​'ll eventually ​​need ​much more capital down the line ​when you're ​ready to ​day trade for a living.

​Most likely, you'd need about $100,000 in capital.​ This can ​be your own money, and/or money from investors.

With a decent track record over 2-3 years, you will easily be able to attract investors to grow their money with you ​for a performance fee.​

This is option I ​recommend since most people don't have an extra $100,000 ​sitting around in their bank account. It'​ll be much easier to get 10 investors ​with $10,000 each, or 20 investors with $5,000 each.

At this time, ​don't worry about having enough capital​ - just focus on ​learning to become a​n effective day trader.

​If you can perform​, ​there won't be a lack of ​investors looking to​​ ​put their money with you.

​2. Choose a Market​

Skilled day traders tend to specialize in one asset class.

Typically, they focus on the ​futures market or the currency (Forex) market.

Each market has different characteristics, such as trading hours, margin requirements, and regulations. When choosing a market to specialize in, pick the one with characteristics most suited to your circumstances.

Trading Hours

For example, the US stock market opens for trading between 9:30am - 4:00pm EST on weekdays, excluding public holidays.

In contrast, the Forex market is open 24 hours a day, even on public holidays.

If you live in Asia (like I do), you'd only be able to trade the US stock market late at night, within the restricted trading hours.

This is a big reason why I personally prefer Forex trading - there are always currencies being actively traded around the clock.

Margin Requirements

Generally speaking, stock trading (including its derivatives like ETFs, CFDs, options and futures) has a higher margin requirement than spot Forex trading.

This means if you're a stock trader, you'd need more capital in your trading account than if you were a Forex trader.

A higher margin requirement is beneficial for beginner traders (it's safer), while a lower margin requirement is beneficial for experienced traders (it allows for more flexibility).

Country-Specific Regulations

If you're based in the Unites States, you need to be aware of the Pattern Day Trader rule as outlined by the Financial Industry Regulatory Authority (FINRA).

According to this rule, if you execute 4 or more day trades within 5 business days on a margin account, you need to maintain a minimum account size of $25,000. This applies to all US-based traders of stocks (equities), corporate bonds, futures and options.

Forex day traders tend to be subject to less regulation than other traders. For example, they do not operate under the jurisdiction of FINRA - even if based in the US - and are thus not subject to the Pattern Day Trader rule.

Why I Choose Forex Trading

Trading currencies, as composed to the other asset classes, as has the most upsides and fewest downsides.

While there is no such thing as a perfect asset class for day trading, in my view, Forex is the closest thing there is to one.

​​3. Choose a Suitable Broker

As a day trader, your most important partner is your brokerage firm. It provides you with the margin (financial leverage) to trade with, and the facilities to carry out your trading operation.

This is why it's crucial that you only trade with brokers regulated by the proper authorities. Otherwise, they have strong incentives to carry out unethical practices against you.