How to Start Day Without Spending a Fortune
So you are ready to start day trading? Good, but be careful. There are so many stock market gurus who say they will help you learn how to start day trading but they only want one thing.
Your Money… That is right. Your money and nothing more.
That doesn’t mean that everyone is out to get you but be on your financial toes even if you think the stock market guru you are considering is the best of the best.
The reality is day trading is difficult and it can be very costly if you aren’t careful in the beginning.
That is where I come in.
I have been there and done that. And I am here to tell you that no matter what you think or believe you can learn a lot on your own before spending your time, energy and money on a chat room and educational service.
So, let’s take a look at how to start day trading in a less expensive and more educational way.
I know you might want to jump right into day trading. Trust me I know the feeling. You saw someone on Twitter or some other social media format claim they made a killing in the stock market and it impressed you.
Before you marry the day trading idea, based off of this information, you must ask yourself many questions and then go on several dates first.
What I mean is don’t look at their (supposed) success and negate the fact that it might have taken them weeks, months or even years to get to that level. Who knows… They might be lying about their success altogether.
Remember, day trading is a sprint and not a marathon so if you want to start day trading get your sprinting shoes on because this could be an amazing journey that takes time.
There are 2 types of considerations you need to take into account before you start day trading.
Let’s look at them both.
Your Financial Situation
If your financial situation is tight or you don’t have enough money to live off of and you believe day trading is the answer you are 100% wrong. Day trading is something you need to consider if you have the financial means to do it. So, if you have $5000 that you don’t mind possibly parting ways with then you might consider giving day trading a shot.
Build up your trading capital first or you will be just throwing money away.
If you have a job that requires you to be there from 9 to 5 EST you will not survive as a day trader. Day trading requires you to be present during the market hours which are M-F 9:30 to 4pm eastern standard time. This doesn’t mean you have to trade all day long but if your time is taken up during these crucial hours you need to consider another means of profiting in the stock market.
Use the Internet
Ok let’s really get into how to start day trading.
If you have the time and financial means to start day trading then realize that most people get attracted to this form of making money because they saw someone like Tim Sykes, Ross Cameron, or Nathan Michaud from Investors Underground do something amazing in the stock market.
However, regardless of what you see, do your own due diligence first.
Research research research before investing in your day trading education. Don’t just take my word or someone else’s word for it. Investigate and delve in deep and once you are in deep then question it some more.
Find out all you can about your potential stock market guru and ask questions to those who have experienced their education and service. For example I have been in all 3 rooms mentioned above and I have no problem answering any questions you may have about my experience.
Contact me here if you want to reach out.
So, what do I mean by due diligence?
Well, let’s say you were interested in joining Investors Underground. I would suggest you find out all you can about them and their service before making any decision.
I have a fondness for Investors Underground as you can tell from my review about them here but that doesn’t mean you shouldn’t do your own due diligence.
My opinion and experience is my own and should be used as a guide and nothing more. Plus I have been doing this for over 3 years and I still feel comfortable recommending Investors Underground.
Some of the things you should investigate are:
- How long have they been trading
- Are they consistently profitable
- Can they provide real third party proof
- What do others say about them
Again reach out to me for help.
Know the Basics
If you are going to start day trading you must know some of the basics. You would be doing yourself a great disservice if you didn’t know certain things before hand.
I put together a great resource page that will help you out greatly.
In addition to that it would benefit you to read some of the great stock market books that are out there.
I would further suggest you learn a little bit about some of the following:
You don’t need to go crazy because some of it might seem a bit confusing in the beginning but do know and learn the basics before you find a stock market guru you want to learn from.
Finding a Stock Market Guru
It’s almost impossible to start day trading without a stock market guru, especially in the beginning. Even if you venture off on your own there are tons of advertisements vying for your attention. Plus you need to be in a stock market chat room to really see the good bad and ugly of day trading.
If you find a stock market guru who you start to gravitate towards then look all over and try to find information on them that will either solidify your feelings or change your mind.
The last thing you want to do is get involved with a day trading service to find out they weren’t who you thought they were.
Some of the things you should consider are:
- The moderators
- Reviews (good and bad)
- Trading styles
- Accessibility (are they responsive to your questions)
Remember there are a lot of people out there just looking to take your money. I wish I would have known then what I know now but the past is over and all I can do is help you minimize mistakes.
That means don’t fall in love with the first stock market guru you find. Take your time and make double sure this is the direction you want to go.
In fact, I highly suggest you sit in on a day trading chat room’s day to day operations first. See if they have a trial offer just to get a feel for what is going on. Then once you find someone you like I would even suggest sitting in their chat room for a few months without making a trade. During that time you can educate yourself and make decisions on whether you want to continue with your chosen stock market guru or not.
This vetting process is crucial for your long term success so, this should not be taken likely.
When Investors Underground put out their basic day trading video series I felt they did a great service to those who are making decisions on how to start day trading.
This series should be seen by every single potential day trader out there. That means that even if you venture off in another day trading direction you still should benefit from the great knowledge Investors Underground has to offer before spending any money.
Once you have watched that series you should look into deepening your knowledge with videos such as the one’s listed below:
Each one of the stock market day trading videos helped me develop into a better trader and my trading wouldn’t be where it is today without them.
It’s important to educate yourself before trading so that you minimize mistakes along the way.
Most people who ask me how to start day trading don’t have a lot of money to begin with. That usually means that they are limited to which broker they can use because they will fall under the dreaded PDT rule.
Basically the PDT states you need $25,000 in your margin account at all times or you can’t trade more than 3 times in 5 consecutive trading days.
There are ways to avoid the PDT rule which I wrote about here but you need to be smart about your trading.
Well, if you decide to work around the PDT rule you might be tempted to over trade due to inexperience.
Don’t over trade.
Over trading will kill your account faster than you can say I AM BROKE!
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!” – Jesse Livermore –
The best way to chose a broker is to decide how much money you are willing to fund the account with and which strategy you are learning from your stock market guru.
For example: If your stock market guru doesn’t like to short stocks then you might not have to worry about looking for a broker with easy borrows.
With that said Suretrader has the best of all worlds for those with small accounts trying to avoid the PDT rule.
It’s not a perfect broker and the commissions can be high at times but it’s the price you are going to pay for starting off with limited capital.
Yes there are other brokers out there so take some time and learn about the other stock market brokers that are great for day trading.
Practice Trading Possibly Paper Trading
I am not the biggest fan of paper trading but you might find that it is helpful and so I would suggest you do what works for you. However, if you are open to it I would suggest trading small shares to get a feel for strategy, emotion and the market. Yes you will be spending money on commission but you can consider that amount to be a part of your education.
What do I mean?
Let’s say you opened up an account at Interactive Brokers because you like that their commissions are small. In fact you will pay $1 per trade up to 100 shares.
That means if you decide to trade 10 shares you still will pay $1 per trade. Keep in mind there are 2 trades (buy and sell or sell short and buy to cover) so commission at IB will be $2 for a round trip day trade.
Anyway, let’s say you decide you are going to trade small shares, rather than paper trade, to get your feet wet and practice your strategy at the same time.
Here is a real life example:
Your plan is to buy 10 shares of XYZ stock if it reaches $9.91. If it goes to $10.41 you will sell your entire position. If your plan should fail you bail on the whole position at $9.75.
Never double down if you are wrong.
The above is a specific plan that won’t cost you much. In fact, at worst you will pay $3.60 if you have to bail on your entire position because you were wrong in your thesis.
10 shares x .16 loss = $1.60 or -1.61%
Total loss $3.60
If your thesis is right, at best you will make $3.00.
10 shares x .50 gain = $5.00 or +5.05%
Total profit $3.00
There are 3 great things about testing your strategy with small shares.
- You practice with real money.
- Your emotions get involved.
- You can test multiple strategies at the same time without going broke.
- You can increase share size as you get better.
Isn’t that great?
Let’s move on…
Day Trading Tools
If you are going to start day trading you need the right tools. That doesn’t mean you need to go and buy 10 different things to be successful. I know plenty of traders who don’t have many fancy tools and do really well in the stock market. However, you will need certain things.
Here are some things you might want to consider before you start day trading.
Monitors – When I first started day trading my set up was small. I had 1 laptop, 1 computer screen and 1 small monitor. My setup has grown over the years but at the time that was just fine for me in the beginning. So, consider getting a small monitor that doesn’t cost that much. You will need it but don’t go crazy in the beginning. Remember less is more.
Here is my recommendation.
Charting Software – Don’t be fooled into buying fancy charting software. Thinkorswim is great for charting as well as for scanning. The best part about it is it’s 100% free and you don’t even need to fund your account. And yes… I still use the charting platform from Thinkorswim today.
Trading Platform – If you want to day trade you are going to need a trading platform. Unfortunately it doesn’t come free when you open up a brokerage account. I have used DAS trader, Interactive Broker’s platform and Active Trader Pro from Fidelity.
DAS by far is the best but it will run you $150 a month. Their comprehensive platform has scanning capabilities, charting and hot keys.
Interactive Brokers’ proprietary platform was ok but not as amazing as DAS (which you can get through IB) but it was only $35 a month.
Active Trader Pro from Fidelity is free with the below requirements.
To become an “active trader,” you would need to trade at least 3 times a month, or 36 times a year. We have an Active Trader team that can code accounts for the Active Trader Pro software.
Basically you can get the software for free once you join Fidelity but you need to make 36 trades in a 12 year period.
My feeling is if you want to start day trading and can’t day trade more than 36 times in a year then day trading isn’t for you.
ATP is quite nice but there are some limitations day trading at Fidelity and so I don’t highly recommend it.
My best recommendation would be Interactive Brokers’ platform in the beginning if you have enough capital to open up an account there. It’s not perfect but it will keep costs down unless you don’t mind spending the $150 a month on DAS.
Stock Scanner – If you join a chat room you might be able to get by on their watch list or scanners in the beginning. However, I urge you not to follow trades.
One of the keys to trading is to become independent. Once you realize that is the road you must take to survive in the market you are going to want to scan for your own stocks based off of the strategy and criteria you have setup for yourself. For example I like $15 and under stocks so those are the stocks I scan for daily.
There are various ways you can scan for your stocks. One way is to pay for a stock scanner but that is a horrible way in the beginning stages. Especially when there are various free ways to scan for stocks.
The easiest and most cost effective way to scan for your own stocks would be to use the Thinkorswim scanners that come with their charting platform. Yes that is free too. Yes 100% free.
Another idea is to use Benzinga’s pre market watchlist. Their watchlist gets posted daily around 8:45am so check back regularly.
I still use Thinkorswim and Benzinga to scan for stocks today. Add in the fact that I am still a member at Investors Underground and, with their stocks on watch, I have enough stocks to trade.
As I said above “there are so many stock market gurus who say they will help you learn how to start day trading but they only want one thing. Your Money… That is right. Your money and nothing more.”
That statement couldn’t be farther from the truth. However, now that you are wiser you are now prepared to start day trading without being fooled.
Take your time. Remember that the stock market opened up in the 1800’s and it is still open today. That means it most likely will be open tomorrow and the next day and so on…
As always reach out to me whenever you need help because I care and I truly want you to survive in the stock market.
Some of the links in this post are from my sponsors. I thought you should know because honesty is better then sugarcoated bullsh*t.