Is it possible to become a day trader in 7 steps? Absolutely. But you can’t just dive right in and expect to thrive immediately.
It takes time to understand how the market works, find your strategy, and find your day trader stride.
If you want to become a successful day trader, you need to start with the right mindset. You need to dedicate time, discipline, and effort to your trading, starting with your trading education. Ready to get started the smart way? You’re in the right place.
This is your seven-step guide on how to become a day trader. Let’s get to it!
Table of Contents
- 1 What Is Day Trading?
- 2 Life of a Day Trader
- 3 Casual vs. Part-Time vs. Full Time Day Traders
- 4 What Is a Day Trader’s Salary?
- 5 Examples of Successful Day Traders
- 6 How to Become a Day Trader in 7 Steps
- 6.1 1. Trading Strategy
- 6.2 2. Risk Management
- 6.3 3. Technical Analysis
- 6.4 4. Stock Market Patterns
- 6.5 5. Day Trading Software
- 6.6 6. Test Strategies Before Risking Real Money
- 6.7 7. Choose the Best Online Broker for Day Trading
- 7 Day Trading Account Requirements
- 8 Key Tips on How I Became a Successful Day Trader
- 9 Join My Trading Challenge
- 10 How Long Does it Take to Become a Day Trader?
- 11 How to Become a Day Trader: The Bottom Line
What Is Day Trading?
For example, let’s say you buy shares in Company X, expecting the price to rise. Then, you sell your shares the same day. If you plan the trade well, you end up with a profit.
Benefits of Day Trading
But to get there, you gotta do your homework. You can’t cheat success in the stock market.
Life of a Day Trader
When I was learning, I put in hours and hours every day. I skipped classes in high school and college to research and trade. I call it the hustle and the grind.
My point? Trading is a marathon, not a sprint.
Yes, I have several millionaire students, but they put in the time.* They studied their butts off. And they’re dedicated to continuing to learn.
(*Please note: My results, along with the results of my top students are far from typical. Individual results will vary. Most traders lose money. My top students and I have the benefit of many years of hard work and dedication. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Casual vs. Part-Time vs. Full Time Day Traders
There are many approaches to trading. You can be a casual day trader, a part-time day trader, or a full-time day trader. I don’t recommend the last option until you have enough experience and consistency.
A casual day trader tends to buy stocks randomly. Maybe they buy and sell stocks spiking big on news. Casual day traders may take weeks or months between trades.
Full-time traders watch and trade the markets full time. It takes knowledge and experience.
What Is a Day Trader’s Salary?
I get this question a lot. You have to understand that day traders don’t earn a monthly or annual salary.
Examples of Successful Day Traders
Tim Grittani, arguably the greatest penny stock trader ever, didn’t make money for his first nine months. Now he’s made over $12 million.* Micheal Goode and Mark Croock are two of my other millionaire students.*
They stay humble. That inspires me and makes me proud.
How to Become a Day Trader in 7 Steps
Wanna know how to become a day trader? Here are seven key steps you need to understand.
1. Trading Strategy
There are lots of strategies for trading. You have to find one that works for you and has a good risk/reward ratio.
Which leads me to…
2. Risk Management
It’s smart to trade small when you lack trading experience. And it’s critical to cut losses fast.
Some of my biggest losses — back in 2003 and 2004 — happened when my ego got the best of me. I threw my risk management rules out the window. I tried to force trades. My mindset was warped, and I broke all my own rules. These mistakes nearly took me out of the game.
3. Technical Analysis
I want stocks to prove themselves before I take a trade. I teach my students the same. So I research the company. I search for news on it and check its charts.
4. Stock Market Patterns
To become a day trader, you also need to learn to recognize patterns. Chart patterns repeat. You have to learn how to spot and trade them with a strategy that works for you.
5. Day Trading Software
When it comes to day trading penny stocks, I have one top choice…
I’ve used a lot of trading software and sites over 20 years of trading. And none were designed for the penny stocks I like to trade.
The new Breaking News Chat feature is a game-changer. Two former Wall Street pros watch for news that can move stocks. Members get alerts on the most actionable news. This tool has changed trading for me in 2020. My profits are insane this year.* That’s partly due to the pandemic volatility and this incredible tool.
6. Test Strategies Before Risking Real Money
I recommend new traders start with paper trading. But be aware that you won’t have the same emotions paper trading as you will with real money. And treat your virtual account the same way you plan to with your real account.
7. Choose the Best Online Broker for Day Trading
Different brokers are good for different strategies. There’s no perfect broker, but some are better than others…
Be wary of offshore brokers. Offshore brokers are not FDIC (Federal Deposit Insurance Corporation) insured. So if something goes terribly wrong, you aren’t insured.
Order Execution Time Is Key
Some brokers charge little or no commissions — but beware. You can get screwed by bad order execution.
This is one of the reasons I stick with the bigger brokers.
You want a well-known broker that has decent execution and does the job you need it to do. Avoid cheap day trading apps. And, of course, invest in your education.
E-Trade or Ameritrade?
Which trader is better for you? That depends on your needs. As you learn how to become a day trader, you’ll have to make some decisions. Do your homework.
To reiterate: Look for a company with good order execution time and one that does everything you need it to do. That may mean having accounts with two brokers. It’s what works best for you.
Day Trading Account Requirements
There are some requirements you need to consider if you’re going to be a day trader. Thankfully, there are a couple of regulatory bodies with everyone’s best interests in mind.
There’s the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). FINRA is a not-for-profit self-regulatory body for the financial industry. The SEC is a government body created to protect individual investors.
SEC Regulation and the Pattern Day Trader Rule
The pattern day trader (PDT) rule defines a day trader as someone who makes more than four trades within a five-day trading period. The rule requires a maintained account balance of at least $25,000. Some brokers have requirements that exceed this industry standard.
The SEC supports the PDT rule on your behalf and FINRA supports the rule on the behalf of the industry. There was a time I didn’t like this rule. But since I’ve been teaching for the last decade, I’ve come to appreciate it.
It keeps inexperienced traders from getting into addictive trading behavior. It’s there for your protection.
You can still trade with a smaller account — you just can’t trade as often. That’s good. It forces you to do more research and be more careful about every trade. It can help you develop better habits and self-discipline.
Key Tips on How I Became a Successful Day Trader
What do successful day traders do? Let’s put it all together. And before you make a single trade, you have A LOT of studying to do. Start with “The Complete Penny Stock Course” by my student Jamil. It’s a thorough overview of my key trading lessons.
#1) Cut Losses Fast
When I first started trading, I didn’t have enough money in my account to let losses run. So I didn’t know how important it is. I had no choice but to cut my losses fast.
Until I got cocky…
My losses from 2003 and 2004 I mentioned earlier? They happened because I tried to force trades. I ignored my own rules and let my ego get in the way. Impatience got the better of me. I had a three-month run where I lost over $100,000 each month. All because I went against my own rule to cut losses fast.
Learn this now, before you even start: Cut losses quickly.
#2) Fine-Tune With Small Accounts
Since I started teaching, every year I take one of my accounts and bring the balance down to $12,000. I do this for a few reasons: It forces me to think like a beginning trader in terms of the PDT rule. And it forces me to make smaller trades and be more careful.
I force myself to play small to be a better teacher and trader. My trading is more conservative and I keep my emotions out of my trades. I recommend you start with a small account once you’re ready. Then, fine-tune your strategy and discipline.
#3) Avoid Leverage
Don’t use leverage. Ever. I hope you heed this advice.
There may be times when you’ll use a margin account. Specifically for short selling. Using a margin account for short selling doesn’t have to involve leverage. You can learn how by signing up for Pennystocking Silver and watching every lesson.
#4) Start Small
If you keep your trades — and your losses — small, you can stay in the game longer. That gives you the chance to learn and experience more in the markets. It prevents you from blowing up your account before you find consistency.
Don’t put your future and account at risk. Play it safe. Trade with a small position size at first. Once you’re consistent with a strategy you can size up slowly. Then it’s rinse and repeat.
#5) Never Stop Learning
I can’t repeat this enough: Never stop learning.
Day trading penny stocks is not a way to get rich quick. Beware of so-called gurus out there who tell you otherwise. Or that once you know a play you’ve got it for life. That’s BS.
You have to keep learning. Did you know that the word guru means to bring from darkness into light? I don’t like to call myself a guru. But I do want to bring you from lack of knowledge into the light of knowledge. Never. Stop. Learning.
Join My Trading Challenge
There’s a ton of crap on the internet. There are over five million hits for ‘how to become a day trader with $100.’
You can spend hours lost on ‘how to become a day trader’ threads. You’ll find so much information, it’s almost impossible to decipher real from fake.
How Long Does it Take to Become a Day Trader?
How quickly will you put it all together? It comes down to your dedication and the time you put in.
How much time can you dedicate per day to studying and watching markets? How bad do you want it? My top students got it when they got serious and treated it like a business and career.
The sooner you put in the time and effort to learn, the better off you’ll be with the right mindset.
How to Become a Day Trader: The Bottom Line
Now you’re more informed. Read this post again and bookmark it.
Also, check out the links I share in this post to get more information on specific terms, concepts, and topics. Believe it or not, this blog isn’t about me — it’s about you and your future.
Have you started day trading? Are you ready to start? What’s holding you back? Leave a comment below.