In a world where everyone has easy access to online trading, why are there only a few succeeding as day traders? After all, what investor has not dreamed of becoming a day trader—working comfortably at a home computer, being your own boss, watching profits roll in? While many aspire, few actually succeed.

What Does a Day Trader Do?

A day trader actively buys and sells securities, often multiple times during the day, but without carrying any open positions to the next day. All buy and sell positions taken during a trading day are squared off on the same day before the market closes. Day traders are different from active traders who may hold a position for multiple days, or from investors who invest for longer periods. Day traders also use leverage to increase their intraday trade exposure.

1. Conduct a Self-Assessment

Successful day trading requires a combination of knowledge, skills, and traits as well as a commitment to a lifestyle. Are you adept with mathematical analysis, full of financial knowledge, aware of behavioral psychology (in yourself as well as others), and do you have the stomach for entrepreneurship? Contrary to the perceived notion of an easy life or easy money, day trading actually requires:

• Long working hours
• Very little leave from work
• Continuous self-learning with no guidance
• Risk-taking abilities
• Never-ending commitment to daily activities of the job

The right mindset is the most important (and the very first) requirement in becoming a day trader. Unless you are prepared to devote time, self-learn, and be mentally prepared to take risks and suffer losses, do not try day trading. Books like "Trade Your Way to Financial Freedom" by Van K. Tharp and "The Psychology of Trading" by Brett N. Steenbarger are good resources for learning more about day trading and performing a self-assessment.

2. Arrange Sufficient Capital

No one can generate profits consistently. Intermittent and extended losses are part of the day trading game. To handle these risks, a day trader must have a sufficient cushion of capital. As Van K. Tharp explained in "Trade Your Way to Financial Freedom," entering the trading world with only a small amount of money is a sure path to failure. Before quitting your job to trade full-time, Tharp recommends having at least $100,000 for trading. Novices can start with smaller amounts, depending upon their selected trading plan, the frequency of trading, and other costs they bear. To actively day trade, it is required that you maintain a balance of $25,000 in your trading account.

3. Understand the Markets

Day traders need a solid foundation of knowledge about how the markets function. From simple details (like exchange trading hours and holidays) to complex details (like the impact of news events, margin requirements, and allowed tradable instruments), a trader needs to have a broad knowledge base.

4. Understand Securities

Stocks, futures, options, ETFs, and mutual funds all trade differently. Without a clear understanding of a security’s characteristics and trading requirements, initiating a trading strategy can lead to failure. For example, traders should know how margin requirements for futures, options, and commodities significantly impact trading capital or how an interim assignment or exercise of an option position can shatter the trading plan completely. Lack of knowledge about these necessities specific to securities can lead to losses. Aspiring traders should ensure full familiarity with the trading of selected securities.

5. Set up a Trading Strategy

Novice traders entering the world of trading can begin by selecting at least two established trade strategies. Both would act as a backup of each other in case of failure or lack of trading opportunities. One can move on to a greater number of strategies (with more complexities) later, as experience builds up. The trading world is highly dynamic. Trading strategies can consistently make money for long periods but then fail at any time. One needs to keep a close eye on the effectiveness of the selected trading strategy and adapt, customize, dump, or substitute it depending upon the developments.

6. Integrate Strategy and Plan

Selecting the right trading strategies alone is not sufficient to succeed in the market. The following considerations need to complement the strategy to come up with the trading plan:

• How the strategy will be used (entry/exit strategy)
• How much capital will be used
• How much money per trade will be used
• Which assets will be traded
• How frequently to place trades

7. Practice Money Management

Effective money management can help you win even if there are only four profitable trades out of 10. Practice, plan, and structure the trades according to a designated money management and capital allocation plan.

8. Research Brokerage Charges

After thorough research, select the brokerage plan wisely. It is advisable to select the features depending upon your trading needs and avoid subscribing to ones that are not needed. Novices should start with the low-cost basic brokerage package matching their initial trading needs and later opt for upgrades to other modules when needed.

9. Simulate and Backtest

Once the plan is ready, simulate it on a test account with virtual money (most brokers offer such test accounts). Alternatively, one can backtest the strategy on historical data. For a realistic assessment, keep consideration for brokerage costs and the subscription fee for various utilities.

10. Start Small and Then Expand

Even if you have sufficient money and sufficient experience, don’t play big on the first trades of a new strategy. Try out a new strategy with a smaller amount and increase the stakes after tasting success. Remember, markets and trading opportunities will remain forever, but money, once lost, may be difficult to reaccumulate. Start small, test to establish, and then go for the big ones.

In summary, mastering the art of day trading in 10 easy steps is possible, but it requires dedication, a solid understanding of the markets, and a well-thought-out strategy. The journey to becoming a successful day trader is challenging, but for those who are willing to put in the effort, the rewards can be substantial. So, if you aspire to be a day trader, start with these 10 steps and prepare yourself for the exciting world of day trading. 

Tickeron's Offerings

The fundamental premise of technical analysis lies in identifying recurring price patterns and trends, which can then be used to forecast the course of upcoming market trends. Our journey commenced with the development of AI-based Engines, such as the Pattern Search Engine, Real-Time Patterns, and the Trend Prediction Engine, which empower us to conduct a comprehensive analysis of market trends. We have delved into nearly all established methodologies, including price patterns, trend indicators, oscillators, and many more, by leveraging neural networks and deep historical backtests. As a consequence, we've been able to accumulate a suite of trading algorithms that collaboratively allow our AI Robots to effectively pinpoint pivotal moments of shifts in market trends.