How to become a day trader ?

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Traders and investors are two main categories of stock market participants.

Although technically they are both engaged in investing activity it is the duration that is the most significant dividing line.

Investors have a longer time horizon and may hold stock positions for many years. day traders are at the opposite end of the spectrum.

Here are some points to remember if you're interested in day trading.

• What does it mean to be a day trader ?

• Here are some reasons you might consider becoming a day trader.

• What are the potential risks associated with day trading?

• Requirements day trading.

• How to become a successful day trader ?

What is a Day Trader?

A day trader, in its strictest meaning, is someone who closes and opens positions during the trading session rather than holding them for longer periods.

Trade time spans within a day can vary greatly - from a few minutes to several hours.

Day traders tend to pay less attention to the company's fundamentals and instead focus on technical charts that show how the stock price is performing right now and how it has performed historically under certain conditions.

Gust Kepler (ticker: BLBX), CEO of trading software company BlackBoxStocks, says that a day trader could buy a position at a bankrupt company because there is an uptrend.

How you might want to become a day trader ?

Day trading is a popular way for people to make money. Nigam Arora, chief executive officer at The Arora Report, said that day trading can be enticed because it shows a friend making a lot of money.

Kepler states that day traders who succeed can earn more by working only a few hours per day on their laptops than they would if they worked 40 hours per week.

He says, "It can prove very lucrative for those who learn how it."

What are the risks of day trading?

Day trading is not easy. There are many success stories.

Kepler believes that only 15% of day traders succeed.

He thinks this is because he is able to witness many success stories as a trading software provider.

Arora says that the number is much lower and suggests that only 1% to 2% of people are really successful.

Arora states that day trading in long stocks positions can lead to "loss of all your money." You can lose more if you try to shorten the market .

Day traders run the risk of not making enough money to pay for the higher transaction costs associated with day trading.

Robert Johnson, a finance professor at Creighton University, says that academic studies on day traders around the world consistently show that most day traders fail.

"Trading is dangerous to your wealth," was the central message.

Day trading can also pose a psychological risk if it is combined with a gambling mindset that could lead to addiction .

Some people feel a rush of dopamine when they gamble or trade high-risk stocks.

Investors become gambling addicts when the dopamine-induced rush becomes the incentive.

Aaron Sherman, president of Odyssey Group Wealth Advisors, says that day trading is not more likely to make one rich than playing on a roulette wheel or at a blackjack table.

"And, much like gambling, you lose more if you keep doing it."

Day Trading Requirements

A brokerage account is required if you wish to trade stocks day-to-day. Brokers charge their investors for execution of trades.

Day traders will likely choose to do-it yourself (DIY) and may opt for an brokerage account, or discount broker which allows investors to purchase and sell investment securities via the broker's app or website.

A brokerage might also offer a trading platform, which displays real-time information and allows traders to view technical charts.

It may also provide scanning that shows which stocks have made the most moves.

Some platforms let investors place trades online directly with a broker for a fraction or even nothing depending on what asset they are trading.

Online brokerages that offer discounts for DIY investors include Charles Schwab Corp. SCHW, Fidelity Investments TD Ameritrade and E-Trade.

Raymond James Financial ( RJF), and Edward Jones are two examples of full-service brokers.

To be considered a Pattern Day Trader by FINRA, your account must be funded with $25,000, and you must make at least four stock trades in five days.

These trades must not exceed 6% of your trading activity during that time period.

This is regardless of the brokerage account minimum.

It might be zero dollars, but it only applies to customers trading less than pattern-day traders.

You should also consider special margin requirements when trading pattern day accounts.

However, this large amount of money can be a benefit to day traders. You can make more money if you have the funds to purchase higher-priced stocks or larger chunks of lower-priced equities.

This will allow you to get more bang for your bucks when it comes down to transaction costs.

You won't be able to maintain a $25,000 account if you make three to five stock trades per day with the same broker.

Or, you will need to trade in an international or domestic market.

How to be a successful day trader ?

The most important skill to have in day trading is the ability to manage your temperament.

Arora states that successful day traders are calm, can follow rules, even when money is involved, and are good at pattern recognition.

Kepler says that day trading requires a lot discipline.

Even those with a high education can end up overtrading and not quitting when they are ahead.

You will want to learn if you feel you are competent. You can find a lot of trading resources online, as well as books at the library.

Do your research before you pay money for courses in trading.

After you feel you know the basics, Arora suggests that you start with short term trading where you keep positions for at least a week or two months.

These time frames are more flexible than those that require you to invest small amounts of money.

If you feel you are succeeding, you can reduce the timeframes slowly until you are opening and closing trades on the same day.

Once you are a seasoned day trader, it's time to start looking for technical patterns and stocks which are moving a lot.

To see the headlines and individual stocks, you can scan them.

You may need to look at news and technical charts of multiple stocks, indices, and other trades.

Therefore, it is a good idea to have a home-office with multiple screens and reliable internet access.

Remember that day trading can be very risky and not for everyone. Day trading should only be considered as a hobby by those who already have a lot of wealth.

Johnson states that investors often watch financial news channels 24/7 and are influenced by trading.

It is easier to achieve investment success by taking fewer decisions and practicing buy/hold investing.