So you want to know how to day trade for a living. I get it; you dream of telling your boss what you really think of him and running off in the sunset with your laptop in hand.
Ready to grab the bull by the horns and become a day trader? Heck, if 21-year-olds do it, why can't you?
Well, they always say you should begin with the end in mind. In this case, perhaps your end is a vision of you on a beach with your laptop, making a few trades whilst sipping a cold beer.
But unfortunately, you’re stuck working 9-5 in a cubicle and the closest thing you have to the beach is your tropical screensaver.
You're in luck, however, because I'm going to break down how to get to the beach with your beer whilst flipping your boss the bird.
I think you know by now, get rich quick schemes are just that, schemes. There’s no elevator to success if you want to learn how to day trade for a living. You need to take the stairs.
So the question remains: can you make money as a day trader? Personally, I feel the bigger question is “can you make enough money as a salary to sustain yourself?”.
This isn't a profession in which you get your paycheck every two weeks without fail. Because nothing is certain in the game of trading.
From market fluctuations, the cyclical boom and bust, some things, well most are out of your control. I'd be remiss not to mention commissions, data fees, software fees, taxes, etc. that also need to be accounted for.
Does learning how to day trade for a living scare you? No need to fret, anything is possible if we break it down into simple, easy to understand steps. So let’s begin with the end in mind and work backward from the beach to now. Because hey, there’s no better way to eat that elephant than one bit at a time.
Here is your first activity: Grab a pen, and a piece of paper, read the questions below and write down all the answers.
Now, write down the answers to the following:
So based on your dreams (where do you want to be - the end goal) vs. where you are now what is the difference? What amount of money do you need to fulfill this goal? Break it down per year, month and day. This folks is the amount you need to make to sustain your desired end goal.
First things first, if you don't have a clue where to start learning how to day trade for a living, I've listed the steps below:
Setting a goal is always the easy part in learning how to day trade for a living. The real challenge is picking the right steps to achieve your goals. I don’t care how committed you’re to achieving your goals, if you’re running west looking for a sunset, you’ll be disappointed.
That’s why if you want to achieve your goal of day trading for a living, you need to create a system that works.As a result, design a great system or process instead of just a goal. It’s the system that wins. In fact, we refer to this system as your strategy or trading plan (find out when to use a stock loss vs stop limit order).
With a system, you are clear on your strategy. This means having a trigger into the trade instead of just trading the setup.
It means knowing when you will enter and exit the trade. You're clear on profit targets as well as stop locations and use them. It’s either a setup or it isn’t. Trading is black and white, not shades of grey.
There is no right answer and no one proper method of trading. Especially when learning how to day trade for a living. The method has to fit you, and it may take several tests of different day trading strategies to find one that sticks.
What worked for me was testing around four then I narrowed them down to two: Day After The First Red Day and the Pre-Market Gap and Crap (don't laugh at the name, it works for me).
Below is a screenshot from one of the strategies I was testing paper trading. It is called the Day After The First Red Day.
What I look for are stocks that have had a big run up over the course of a few days or even weeks if I’m lucky. As you can see in the LGCY* chart below, it ran for about 9 days, going from $6-$10.
As you know, everything that goes up must come down. I then wait for the first red day, where the stock closes lower than it opened.
Typically, what I’ve noticed that with stocks that run up, the day after the first red day, they perform weakly. I plot the previous day's close price — teal resistance line, additional resistance levels — red lines and I wait for the morning run up/spike to short into the overhead resistance.
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*Disclaimer for this chart. I probably wouldn’t have traded this as the volume was really low. I just wanted you to see the Day After First Red Day set up.
Yes, but don’t expect to be a full-time day trader with this account size. However, it's a good starting point on your journey.
One can always start and grow a small account with options contracts. They allow you to trade the option of a stock like Google, Amazon, or Apple for a fraction of what it would cost to buy an actual share of the stock. This makes day trading stocks more available to the average trader due to the low funding requirements.
The key takeaway here is that unless you are generating mind-blowing returns with a small account balance, you can day trade with a starting account of $1000, but ensure that you are not quitting your day job just yet.
If you’re thinking of day trading stocks, you must have $25,000 in your account to avoid the Pattern Day Trader designation. In a nutshell, it’s the FINRA designation for a stock market trader who executes four or more day trades in five business days using a margin account. This is provided that the number of day trades is more than six percent of the customer’s total trading activity for that same five-day period.
If you don’t have that kind of cash on hand, I recommend checking out swing trading. This is where you don’t settle on the same day. In fact, what’s great about swing trading is that these type of traders don’t fall under the PDT rule.
Before you take the plunge to start day trading these are some items to consider:
If you feel discouraged please remember, "Every expert was once a beginner". Both trading and day trading for a living is possible if you're willing to take the time to learn.
There's no magic bullet for success. You’ve got to embrace the process and enjoy it because you can’t escape the hard work it takes to get better.
Bullish Bears is here to guide you in your journey, our number one focus is you. We are not here to give you the quick tips and tricks, call out the hot trades. No, we want to empower you to make your own informed decisions.
The ability to show up every day even when you are not motivated to learn, create, make something is the most valuable trait you need to be a professional. It doesn't come easy but it’s a requirement to survive the process of creating or doing something unique and remarkable. If you want to become remarkable, come join us today.
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