How to succeed as a day trader

We’re all familiar with the hype, but is it really possible to make a success out of day trading? Is it something that you can achieve with skill and effort, or is it just a matter of luck? The answer is that yes, some day traders make money consistently because they’re smart, have the right temperament, and use strategies that work. To get to that point, however, they have to put in the work. Day trading isn’t a way to get rich quick. It’s a profession that offers rewards to those who are prepared to earn them.

The basics

To start out as a day trader, as in other areas of business, you’re going to need some capital. This should really be at least £20,000 if you plan to trade stocks, but could be as low as £300 if you’re limiting yourself to forex. Futures trading falls in the middle, with £4,500 a good starting amount. Don’t be tempted to compensate for low starting funds by taking on really high leverage, even where it’s available, because this can quickly get you into trouble. Don’t go for penny stocks, because even though they’re chap, your chances of doing well with them are extremely low.

Make sure that you have a good trading setup, with a fast computer and internet connection and access to all the software tools you need (many of which you can get for free). Find a platform and a broker or series of brokers you can trust. Be wary of offers that sound too good to be true. With a solid day-to-day trading plan, you still have a chance of getting really lucky – and a lot less chance of getting scammed.

Make a commitment

The only reliable route to success in day trading requires commitment. Most people don’t start making money for at least six months – indeed, you’ll do better if you focus on not losing it – so you will need to have another means of support during this period. If that’s a job, then you’ll need to make sure that you can still commit enough time to trading on an ongoing basis. Don’t be unrealistic about the commitment you can make – if necessary, save up money for living expenses first so that you can commit more time. Don’t try to speed up your trading in order to make better use of your time – it’s likely to result in you losing more money than you gain.

Get to grips with risk

Successful trading is all about managing risk. It’s all too easy to get carried away, especially when you’re using leverage as it seems as if you have more money than is really the case. On the other hand, you need to have the confidence to push the button and make trades, or you’ll never make any money. It’s important to understand your own psychological biases so that you can keep them in check and make clear, reasoned decisions. Set a level of risk that makes sense for you, and don’t let yourself be tempted to exceed it. Knowing that you’ve done so can help you feel bold enough to make trades that fall below that threshold without second-guessing yourself.

Explore different asset classes

Data feeds for different asset classes can require an investment, so in your early days, you may want to limit your trading to just one or two asset classes. In time, though, you should broaden your options. Learn about trading CFDs and stock options. Make fantasy trades to see how they fit with your approach. Every trader has a subtly different style and does better with some asset types than others. Once you’ve found your mainstay, you can consider other types of asset on days when trading is slow.

Keep learning

Some day traders like to think that they know everything after a year or two. They rarely last for five years. The most successful traders are those who recognise that there are always new things to learn, if for no other reason than that the market is always changing. Read books on trading. Read interviews with successful traders. Talk to those at your own level to exchange insights. Most importantly of all, look back dispassionately over your own trades and reflect on what worked and what didn’t. Often, the most useful learning experiences are your failures.

With the right attitude and the patience to stick at it, you can become a successful trader. Experience will help you to get better results and reap the rewards you’ve worked for.


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