3 answers
Braylon
Student
Wahoo, Nebraska
3
Questions
Asked
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What is the best way to learn how to day trade?
Im in economics now and I want to learn how to day train.
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3 answers
Matthew L. Tuck, J.D., M.B.A.
CEO/Managing Attorney, Greater Detroit Area
64
Answers
Lansing, Michigan
Updated
Matthew L.’s Answer
Hi Braylon. Great question.
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.
1. Take a course on Day Trading and read all you can about it. Don't read or watch the fake interweb stories that tell you that you'll get rich doing it. You won't.
2. Play with a trading simulator to get familiar with the process. Pick a strategy or two that you like and learn them inside and out.
3. Get an internship or job with a stock broker to see how it all really works. If you just love trading stocks, this may be the job for you.
4. If you want to try it for real, save up a little money (not more than you can afford to lose--$500 or less) and find one of the discount brokers that will let you make small trades for low commissions/fees.
5. Practice, practice, practice. It will take you at least a year to learn what you're doing. Don't give up because it's hard (this is true of most things in life that are worth doing).
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.
Matthew L. recommends the following next steps:
Thank you so much, Matthew L.!
Braylon
You are welcome! I hope you found it helpful. If you like stocks and have a knack for it, there are tons of jobs in the stock world where you actually can make a lot of money trading and have fun. Good luck!
Matthew L. Tuck, J.D., M.B.A.
Emily Wolcott
Human Resources Professional
11
Answers
Lake Mary, Florida
Updated
Emily’s Answer
There are tons of free stock simulation games online. One that I used in an Economics course is called "The Stock Market Game." It is a great way to get familiar with stocks, how the stock market works, and the terminology used in trading.
Your advice was so helpful!
Braylon
Grant Diener, CPA
Consulting Manager at PwC
8
Answers
Philadelphia, Pennsylvania
Updated
Grant’s Answer
Start reading the WSJ daily as well as any other major online publications about business and the world. Day trading is a very difficult and a risky way to trade if you don't have the capital / funds to support this hobby. Consider trading yet with more of a long term strategy with justification on why you want to be a shareholder in a Company. You can go to the sec.gov or company's websites to look up their most recent 10K (annual financial statements) or 10Q (quarterly financials) to see how the company is performing. The best way to get involved is to read more and follow daily trends of the market as there are global economic implications that drive the market (war, inflation, rates, debt ceiling, etc) and not to mention all the speculation and manipulation that may occur by large financial institution / investment bankers.