How To Become A Profitable Trader With A 9 To 5 Job – 12 steps

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How To Be a Day Trader Day How to become a day trader at home Education Just like any other skill, the first thing an aspiring day trader needs to do is educate himself or herself. How can you do this if your goal is to day trade from home?

You basically have four choices: Take day trading classes, find a paid trading coach, ask a friend or family member that is a successful trader to be your mentor, or do like I did, learn on your own. There's no shortage of people willing to teach you how to trade. But, before plunking down thousands of dollars, you might want to do some research into what you're going to be learning and from whom.

What are their credentials? Also, if possible, consider contacting people that have taken the class or used the day trading coach's services. What do they have to say? Was it worth the money they paid? Are they trading well now? Learning how to be a day trader can be quite different than learning other skills. Because, any skill or business that has the potential to make the kind of money that traders can make is going have a lot of participants that will not freely share their methods for success.

Going to a day trading forum and finding solutions to your trading problems is not always going to be as easy as say, going to a gardening forum and asking others how to grow better vegetables. I'm sure experts in that field will have no problem with giving you very helpful information. With trading however, many traders wrongfully feel that if they help you, or show you their way to trade, that some how they'll be negatively effected.

I don't think this is the case at all, unless we're talking about some kind of very unique, small edge that would absolutely be squashed by too many traders using it. Some, like myself feel how to become a day trader at home most successful day traders are using information that is widely available to the public and has been around for many years. Take for instance the patterns and price action trading strategies on my site. But, they keep occurring week after week, year after year.

Don't make the mistake thinking that you have to learn complicated techniques to make money. One thing many don't understand is, that even if someone were to drop several good trading systems in the lap of 1, different people that were trying to become intraday traders, probably at least of them would not make money due to the how to become a day trader at home psychology and tolerance for losses that is required of anyone in this business.

Also, many of them would've never traded the systems exactly according to the rules. People have a strong tendency to put there own spice how to become a day trader at home the trading rules of any strategy anyway, so never worry about sharing information.

The markets are so large and there's so many different ways for day traders to work it, it simply doesn't matter. So, if you decide to learn how to be a day trader on your own like I did, what's the best way to get started? Well, in addition to this site of course, I'd suggest reading about classic price pattern analysis and technical analysis.

Trading magazines sometimes have interesting info to read, but you'll often find they take you down complicated paths that simply aren't required to make money. Very few of today's stock market and trading books were around when I first started trading, so I can't really say that any are required reading.

Really, the best advice I can give you as far as discretionary intraday trading goes, is to keep it simple and not get bogged down with the complications that so many others write about. There's so many different paths you can take while searching for enlightenment in the trading industry, that it can send you into a black hole of confusion.

Don't let that happen to you. Again, keep it simple. A reasonable goal for any trader is to: Exploit natural, common price patterns which cause volatility price expansion giving a trader potential for a decent profit.

Give winning trades a chance to grow into big enough winners, so they outweigh losers and commissions. Use some form of Position Sizing on every day trade. You can choose to complicate things further if you wish, but is it really necessary? Accomplishing these four goals above is sufficient for a day trader to be profitable. OK, so lets say you've educated yourself some and you're convinced that being a day trader at home is for you.

Where do you go from there? If you want to day trade, you're going to need trading software. Specifically, you'll need a a first class trading platform.

Don't settle for any software that doesn't satisfy your requirements. Test drive them all until you find what you you need. You will also need a broker that specifically serves day traders. You'll find that some brokers have decent trading platforms for intraday trading and others will require you to look for third-party software to satisfy your trading requirements. I provide plenty of high quality resources on my site for your convenience I do not receive compensation from them.

If you haven't already read other pages of this site, you'll find that one of the things I'm always preaching about to beginners is to practice trading on a quality day trading simulator until you are consistently profitable and have gained enough confidence to ride through several series of losing streaks, which may take at least a month or two, depending on your trade strategies and trading frequency.

If you can make it through the simulator phase, then maybe you'll be ready to use real money I know some of you won't take this advice, but there it is. A day trader needs capital to trade. It depends on what you want to trade.

If it's stocks you want to trade in the U. Investors, position traders and swing traders hold stocks overnight. Does a new trader want to do this? A new trader should not use any leverage. The best stocks for day trading are ones that allow you buy, sell, short and how to become a day trader at home when YOU need to get in or out. Stay away from low volume, illiquid stocks that will cause you unnecessary pain due to large bid how to become a day trader at home ask spreads or slippage.

I think you'll be happy with those. ETF's are also quite good for day traders, because of their high volume and tight spreads. Generally speaking, home-based day traders can be divided into two main groups. Those that use only price and sometimes volume and those that use price indicators, such as MACD and Stochastics, to initiate their trades. I provide how to become a day trader at home of info on this site about both types how to become a day trader at home trading, but I think you'll find that I'm certainly clear about which camp I belong to.

It's certainly common for a person to start out as one type of trader and evolve to be another. Don't be surprised if that happens to you. You'll eventually find, and it might take years, what type of trader you'll be. It's just a matter of screen time. Trade with fairly tight stops, so that losses are small when trades don't work out. Day Trading Account A day trader needs capital to trade. Price Action or Price Indicator Trading?

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Day trading is speculation in securities , specifically buying and selling financial instruments within the same trading day. Strictly, day trading is trading only within a day, such that all positions are closed before the market closes for the trading day. Many traders may not be so strict or may have day trading as one component of an overall strategy. Traders who participate in day trading are called day traders. Traders who trade in this capacity with the motive of profit are therefore speculators.

The methods of quick trading contrast with the long-term trades underlying buy and hold and value investing strategies. Some of the more commonly day-traded financial instruments are stocks , options , currencies , and a host of futures contracts such as equity index futures, interest rate futures, currency futures and commodity futures. Day trading was once an activity that was exclusive to financial firms and professional speculators.

Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading , day trading is available to private individuals.

Some day traders use an intra-day technique known as scalping that usually has the trader holding a position for a few minutes or even seconds.

Most day traders exit positions before the market closes to avoid unmanageable risks—negative price gaps between one day's close and the next day's price at the open. Another reason is to maximize day trading buying power. Day traders sometimes borrow money to trade.

This is called margin trading. Since margin interests are typically only charged on overnight balances, the trader may pay no fees for the margin benefit, though still running the risk of a margin call. The margin interest rate is usually based on the broker's call. Because of the nature of financial leverage and the rapid returns that are possible, day trading results can range from extremely profitable to extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses.

Because of the high profits and losses that day trading makes possible, these traders are sometimes portrayed as " bandits " or " gamblers " by other investors. The common use of buying on margin using borrowed funds amplifies gains and losses, such that substantial losses or gains can occur in a very short period of time. In addition, brokers usually allow bigger margins for day traders.

Because of the high risk of margin use, and of other day trading practices, a day trader will often have to exit a losing position very quickly, in order to prevent a greater, unacceptable loss, or even a disastrous loss, much larger than his or her original investment, or even larger than his or her total assets.

Originally, the most important U. A trader would contact a stockbroker, who would relay the order to a specialist on the floor of the NYSE. These specialists would each make markets in only a handful of stocks. The specialist would match the purchaser with another broker's seller; write up physical tickets that, once processed, would effectively transfer the stock; and relay the information back to both brokers.

One of the first steps to make day trading of shares potentially profitable was the change in the commission scheme. In , the United States Securities and Exchange Commission SEC made fixed commission rates illegal, giving rise to discount brokers offering much reduced commission rates. Financial settlement periods used to be much longer: Before the early s at the London Stock Exchange , for example, stock could be paid for up to 10 working days after it was bought, allowing traders to buy or sell shares at the beginning of a settlement period only to sell or buy them before the end of the period hoping for a rise in price.

This activity was identical to modern day trading, but for the longer duration of the settlement period. But today, to reduce market risk, the settlement period is typically two working days. Reducing the settlement period reduces the likelihood of default , but was impossible before the advent of electronic ownership transfer. The systems by which stocks are traded have also evolved, the second half of the twentieth century having seen the advent of electronic communication networks ECNs. These are essentially large proprietary computer networks on which brokers could list a certain amount of securities to sell at a certain price the asking price or "ask" or offer to buy a certain amount of securities at a certain price the "bid".

The first of these was Instinet or "inet" , which was founded in as a way for major institutions to bypass the increasingly cumbersome and expensive NYSE, also allowing them to trade during hours when the exchanges were closed. Early ECNs such as Instinet were very unfriendly to small investors, because they tended to give large institutions better prices than were available to the public. This resulted in a fragmented and sometimes illiquid market.

The next important step in facilitating day trading was the founding in of NASDAQ —a virtual stock exchange on which orders were transmitted electronically. Moving from paper share certificates and written share registers to "dematerialized" shares, computerized trading and registration required not only extensive changes to legislation but also the development of the necessary technology: These developments heralded the appearance of " market makers ": A market maker has an inventory of stocks to buy and sell, and simultaneously offers to buy and sell the same stock.

Obviously, it will offer to sell stock at a higher price than the price at which it offers to buy. This difference is known as the "spread". The market maker is indifferent as to whether the stock goes up or down, it simply tries to constantly buy for less than it sells. A persistent trend in one direction will result in a loss for the market maker, but the strategy is overall positive otherwise they would exit the business. Today there are about firms who participate as market makers on ECNs, each generally making a market in four to forty different stocks.

Another reform made was the " Small Order Execution System ", or "SOES", which required market makers to buy or sell, immediately, small orders up to shares at the market maker's listed bid or ask.

In the late s, existing ECNs began to offer their services to small investors. New brokerage firms which specialized in serving online traders who wanted to trade on the ECNs emerged. Archipelago eventually became a stock exchange and in was purchased by the NYSE. Moreover, the trader was able in to buy the stock almost instantly and got it at a cheaper price. ECNs are in constant flux. New ones are formed, while existing ones are bought or merged.

As of the end of , the most important ECNs to the individual trader were:. This combination of factors has made day trading in stocks and stock derivatives such as ETFs possible. The low commission rates allow an individual or small firm to make a large number of trades during a single day. The liquidity and small spreads provided by ECNs allow an individual to make near-instantaneous trades and to get favorable pricing. The ability for individuals to day trade coincided with the extreme bull market in technological issues from to early , known as the Dot-com bubble.

In March, , this bubble burst, and a large number of less-experienced day traders began to lose money as fast, or faster, than they had made during the buying frenzy. The NASDAQ crashed from back to ; many of the less-experienced traders went broke, although obviously it was possible to have made a fortune during that time by shorting or playing on volatility.

In parallel to stock trading, starting at the end of the s, a number of new Market Maker firms provided foreign exchange and derivative day trading through new electronic trading platforms. These allowed day traders to have instant access to decentralised markets such as forex and global markets through derivatives such as contracts for difference.

Most of these firms were based in the UK and later in less restrictive jurisdictions, this was in part due to the regulations in the US prohibiting this type of over-the-counter trading. These firms typically provide trading on margin allowing day traders to take large position with relatively small capital, but with the associated increase in risk. Retail forex trading became a popular way to day trade due to its liquidity and the hour nature of the market.

The following are several basic strategies by which day traders attempt to make profits. Besides these, some day traders also use contrarian reverse strategies more commonly seen in algorithmic trading to trade specifically against irrational behavior from day traders using these approaches.

It is important for a trader to remain flexible and adjust their techniques to match changing market conditions. Some of these approaches require shorting stocks instead of buying them: There are several technical problems with short sales—the broker may not have shares to lend in a specific issue, the broker can call for the return of its shares at any time, and some restrictions are imposed in America by the U.

Securities and Exchange Commission on short-selling see uptick rule for details. Some of these restrictions in particular the uptick rule don't apply to trades of stocks that are actually shares of an exchange-traded fund ETF.

Trend following , a strategy used in all trading time-frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa with falling. The trend follower buys an instrument which has been rising, or short sells a falling one, in the expectation that the trend will continue. Contrarian investing is a market timing strategy used in all trading time-frames.

It assumes that financial instruments which have been rising steadily will reverse and start to fall, and vice versa.

The contrarian trader buys an instrument which has been falling, or short-sells a rising one, in the expectation that the trend will change. Range trading, or range-bound trading, is a trading style in which stocks are watched that have either been rising off a support price or falling off a resistance price.

That is, every time the stock hits a high, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending.

A related approach to range trading is looking for moves outside of an established range, called a breakout price moves up or a breakdown price moves down , and assume that once the range has been broken prices will continue in that direction for some time. Scalping was originally referred to as spread trading.

Scalping is a trading style where small price gaps created by the bid-ask spread are exploited by the speculator. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds.

Scalping highly liquid instruments for off-the-floor day traders involves taking quick profits while minimizing risk loss exposure. The basic idea of scalping is to exploit the inefficiency of the market when volatility increases and the trading range expands.

When stock values suddenly rise, they short sell securities that seem overvalued. Rebate trading is an equity trading style that uses ECN rebates as a primary source of profit and revenue. Most ECNs charge commissions to customers who want to have their orders filled immediately at the best prices available, but the ECNs pay commissions to buyers or sellers who "add liquidity" by placing limit orders that create "market-making" in a security. Rebate traders seek to make money from these rebates and will usually maximize their returns by trading low priced, high volume stocks.

This enables them to trade more shares and contribute more liquidity with a set amount of capital, while limiting the risk that they will not be able to exit a position in the stock. The basic strategy of news playing is to buy a stock which has just announced good news, or short sell on bad news. Such events provide enormous volatility in a stock and therefore the greatest chance for quick profits or losses.

Determining whether news is "good" or "bad" must be determined by the price action of the stock, because the market reaction may not match the tone of the news itself. This is because rumors or estimates of the event like those issued by market and industry analysts will already have been circulated before the official release, causing prices to move in anticipation.

The price movement caused by the official news will therefore be determined by how good the news is relative to the market's expectations, not how good it is in absolute terms. Keeping things simple can also be an effective methodology when it comes to trading. These traders rely on a combination of price movement, chart patterns, volume, and other raw market data to gauge whether or not they should take a trade.