How to Become a Day Trader: A Comprehensive Guide (2024)

The success rate for day traders is estimated to be around only 10%. So, if around 90% of day traders are losing money in general, how could anyone expect to make a living this way? The answer exists in professional training, diligent research, refined skills, great discipline, and the ability to admit mistakes and cut your losses when necessary. Here’s everything you need to know about how to become a day trader.

Day trading success doesn't come overnight; it takes years of practice, persistence and outright dedication. However, if you ensure you are educated by professionals and use a strategy that has been tried and tested, you will find yourself on the right path and possibly even fast-track the whole journey too.

What is a day trader?

Day trading is essentially the consistent action or practice of buying and selling securities and stocks, then selling them within the same day with the goal of making a profit. At the close of the market day, a day trader will have closed all their positions and realized any gains or losses. It is the opposite of a long-term investment approach, in which the investor holds stocks or securities in hopes that they appreciate in value over time.

A pure day trader buys and sells stocks or other investments and ends the trading day in cash with no open positions. If a position is held overnight or for several days, it's called a ‘position trade’. Day traders can use both approaches, but this would be up to the individual, and must align with their strategic routine.

What does a day trader do?

Typically, a day trader trades four or more times during a five-day span. There are two different kinds of day traders:

• Professional day traders work for large financial institutions. They have access to the tools and training needed to make their careers a success, and the big advantage of being a professional day trader is that you aren't trading your own capital. Instead, it is capital from clients and/or the firm, so there's no risk to one's personal equity.
• Individual traders are the other, more common type of day trader. These traders focus on understanding the market, technical analysis, and price movements. They also rely on fundamental data to help guide their awareness of the market conditions.

If you want to pursue day trading, you also need to understand the challenges. You're going to have days when you lose money; that’s inevitable. It's going to take a lot of time to understand, and be comfortable with what you're doing. Even once you understand different strategies and all the terminology, you still might not find success. Day trading is hard. Get used to that idea, but use the warning as a motivating driving tool to persist and make a success of it all!

Can I start day trading with little money?

The short answer to this question is no, you can’t. To have any feasible chance of making money from the market as a day trader you need at least $25,000 to start with. If you are starting with a smaller amount of capital than that, you could consider becoming a position trader or swing trader.

Day trading isn't easy, and there are several areas of complexity that require research for new day traders. If you decide to become a day trader, it's important to understand that day trading isn't a get-rich-quick scheme. Day trading can be fun as well as profitable, if you learn the ropes and set realistic goals.

How to be a successful day trader

Step 1: Take a financial trading course

The best way to really develop an understanding of the market is to get educated. If you want to become a day trader, Upskillist’s online stock trading course is a great place to start. Trading is not the same as gambling: it has nothing to do with luck. A great trader is simply a great decision maker, and the course will teach you the science behind those decisions. After the 16 weeks, you will be trading with confidence, and you’ll know how to manage risk and maximise profit. Education develops skill, skill ensures consistency, consistency leads to discipline and, in day trading, discipline offers financial empowerment.

Step 2: Do your research

Your journey towards becoming a day trader should begin with research into the market, finding the right strategies, and potential platforms to rely on. Whether you're going to dabble in the forex market, the stock market, or any other marketplace, you need to understand how that market works before becoming a day trader.

Step 3: Set your emotions aside

When some people think of successful day traders, they think of everything they see on social media: multimillionaires visiting lavish restaurants and clubs, and driving around in expensive cars. Who wouldn’t be enticed right? But if you have hopes, dreams and aspirations of becoming a day trader, it is important to understand right from the start that if you let the materialistic gains guide your intentions then you will inevitably fail. Successful traders follow their strategy, not their emotions or desires.

Step 4: Start small

Once you've learnt about the markets and how to trade, and you’re ready to enter the market, it's important to start small. It takes time to learn how to day trade successfully, and putting a lot of money on the table to start is a big risk that is just not necessary for you as a new trader. The risk associated with day trading also means you should use money that you're comfortable losing. As horrible as that sounds, you should detach your emotions from the capital you are using to trade with so that you can ensure your trading decisions aren’t emotionally controlled or instigated.

Step 5: Develop a trading strategy and stick to it

The majority of traders make their money on relatively small price movements in liquid stocks or indexes with mid to high volatility. You need price movement to actually make money whether that be in either long or short directions. The key to successful trading is developing techniques to determine entry and exit points. Most traders develop a style they stick with once they are comfortable with it. Some only trade one or two stocks every day, while others trade a small basket of favourites but at the end of the day, understand that this preferential choice is yours to make and once the decision is made, you should stick to the decisions you have made. Consistency is key!

Develop a process and try it out with fictional trades. Refine the process and find what works for you. Experienced traders define what constitutes a trading setup, and the pattern and indicator combination they want to see before pulling the trigger. They rarely deviate from those setups in order to maintain focus and keep their emotions at bay. It’s easy to deviate away from what you know you should be doing which is often where the emotions of trading and hunger for success get in the way but you must learn to be strict, disciplined and mechanical in every step through analysis and into executing a trade. Yes, what we are saying is that you actually have to become almost robotic in your process.

Want to learn more about financial trading?

Upskillist has a number of brilliant online courses to help you become the best trader you can be, no matter what your specific interest. If you want to learn how to become a day trader, the online stock trading course will set you up for success. The commodities trading course will teach you how to trade supply and demand commodities, while the gold trading course will focus specifically on gold. The financial trading & investment course is suitable if you’re in it for the long haul, as is the property investment course. The share trading course will teach you to participate in the stock market by investing in shares of seemingly undervalued companies that have the positive potential for growth.