Wednesday, August 15, 2012

Day Trading as a living

You shouldn't try to make a living with only day trading if you don't have at least 50,000$ in risk capital, money that is put in a high-risk high-reward situation. Don't use your kid's college savings or retirement funds.

Things can go wrong when you're lured by the easy money trap. When you're trading with money you can't afford to lose, you eventually do bad decisions and lose that money you can't afford to lose (what now...). For many people, day trading from home is a dream job. The quick profits, being your own boss, working short hours in your own home and being independent is the best kind of job. After reading some easy-money success stories, you might feel like you're ready to quit your day job and start day trading as a career. But in reality, day trading is still a job, it's different, but it requires work, planning, preparation and caution, like any business venture.

The main concern with following this career path is money. You have to have enough capital to be able to trade, and you must be able to lose some, as with any risk-involved activity. Most people have a hard time accepting the fact that you will lose some money eventually. When you trade, you should always divide your profits in 3; 1/3rd in your pocket, 1/3rd back in your capital money, and 1/3rd saved for when you either lose money trading, have to take a break (vacation, medical), and well, because you should put money aside for rainy days.

Your main capital is for margin trading. This money is fluid, goes in and comes out quick, so the amount available to be invested is usually the same. But sometimes you will invest long-term in shares, and that money won't be available for day trading. Which is why you should always keep on increasing the amount of capital available; because once you put money into long term investments, you have less capital to day trade with, and in turn you make less money per day. Ideally you should have 2 polls of money, and always keep the pool for day trading available, and always keep to pool for investments invested (so it's not idle- idle money could be in your day trading pool to be used).

And you have to realize that you're not the only "player" in the market; there are many many more people, some of them with better information networks, better reaction times (automated machines) and more money than you. So day trading as a career is something reserved to someone who has done enough part time trading to understand that day trading is not all fun, games and easy money.

Take my money,


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