Matthew L. Tuck, J.D., M.B.A.
Matthew L.’s Answer
Day Trading is an interesting process and you should be careful with it because you can lose a lot of money very quickly, even if you really know what you're doing. If your plan is to do it for fun, then it's a great hobby. If you plan on doing it for a job and to earn a living, you should probably look at other careers. The real story behind day trading, despite what you hear on TV or see on Youtube, is that about 99% of day traders lose money. They can't make a living at it unless they are really good and really disciplined and have honed their craft for years. Even then, most lose money.
For those reading this who don't know what "Day Trading" is, it is basically a way of trading stocks very quickly to take advantage of changes in the intra-day stock price to make a profit. Typically Day Traders open and close a position (purchase a stock) during the same day. Hence the name "Day Trading". For example, let's say you buy a certain stock at 9:00 a.m., then sell that same stock at 3:00 p.m. the same day. You would have just completed a day trade. If you are really good at it, you will make a profit. If you buy the share of stock at 9:00 a.m. for $100 and sell it at 3:00 p.m. for $125, you made $25 (before you account for brokerage and other fees--you have to pay a licensed stock broker to make the trades). So if you have a really cheap brokerage, you would maybe net $17. There is also a good chance that it would have gone down, so could just as easily lose $25 (plus commission).
Other difficulties are that you need quite a bit of money to get the lowest fees for trades (most brokerages require at least $25,000 in your account). You should also plan on spending at least a year learning how to day trade and learning system. In that time, you likely will lose a lot of the money you are using to trade.
But if your heart is set on it, a good way to learn day trading is to take a course. If you google "Best Day Trading Courses" you will get a number of results. "Bear Bull Traders" and "Bullish Bears" claim to be some of the best. Udemy also has really good courses on how it works.
Once you have a little bit of knowledge under your belt, you're in luck because--as Emily said--there are some great day trading simulators on line that you can use to see if you like it and to practice. They use real world stock prices and movements from the real stock market, but you're not using real money. TradeStation is supposed to be one of the best simulators for learning.
One other thing to keep in mind is that the best stock traders (day or otherwise) have a system and they stick to it. This usually means something like this:
1. Always Use a Trading Plan - Learn a lot about a particular way to trade and stick to it. Get really really good at it. Specialize.
2. Treat Trading Like a Business - Make rules for yourself and stick to them. Don't be emotional about it (look for modest, consistent profits, not a big, bet the farm win). And treat it like a job. Do it every day. Study, learn all you can.
3. Use Technology - There is an amazing array of tech out there. Find good technology to analyze stocks and learn to use it inside and out.
4. Protect Your Trading Capital - Whether you are doing it for living, for fun or just to try to make some extra cash, protect your capital. Don't bet it all at once. See #2.
5. Study the Markets - Learn how the markets work inside and out, particularly within your specialty.
6. Risk Only What You Can Afford - Set a limit on what you can afford to risk in the market. Don't deviate. This is how problem gamblers lose all their money in Vegas.
7. Develop a Trading Methodology - Find one or maybe two strategies and stick to them. Learn them really well. Again, this will take at least a year.
8. Always Use a Stop Loss - This is a safety setting to make sure you sell the stock automatically if the stock goes below a certain price. This is an order with your broker so that he will sell your stock when it goes down to certain point to protect you from catastrophic losses. See #2.
If you genuinely like trading stocks, you should think about getting a job as a stock broker. You'll need to learn the business and get some licenses under your belt. You can also intern at a stock brokerage firm to see what happens there and if you like it. The great thing about being a broker is you're trading with other people's money, you get great training, you have faster computers, you have mentors, they'll probably pay you to learn and to get your licenses, and you have a lot more information to rely on.
To sum up, whatever you have heard Day Trading is not a good or easy way to earn a living. Depending on who you ask, about 99% of day traders do not earn a living at it, and more likely lose a lot of money. The big numbers people claim on the internet are not real. They're probably trying to sell you something (which is how they ACTUALLY make their money). You also need a lot of money to even make a try at Day Trading as a career or full-time job. A much better option is to take a course to learn about it. Then play with one of the on-line simulators. If you really want to do it and you are good at it, get a job at a brokerage and remember the 8 rules.
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