Day Trading for a Living
It seems that everyone wants to be a day trader these days, but what does being a day trader look like? Here we take a deeper dive into what being a day trader really means.
When it comes to taking up day trading for a living, there are two ways you can go. You can work for yourself or work for an institution, both have their pros and cons.
Working for yourself, you can work from home, and use the limited resources available to you. This is often the thing that appeals to people the most, the idea of being your own boss, making your own hours and money, with no one to answer to.
While working for an institution is for professionals who want to be part of big organisations who utilise a lot of information and resources. The big institutions generally have direct access to a trading desk, more capital, quicker information, etc. These traders are often on the look out for easy profits based on opportunities and news events that they have receive direct access to.
Individual traders on the other hand will have to work on their own and invest their own capital, although they are on their own when it comes to making decisions, they will often rely on tips and guidance from a range of sources, but these will be limited compared to the access that institutional traders have. Generally individual traders wont take as many risks as either, as their capital resources will be limited.
Individual traders may not be as competent as professional traders, this is simply due to experience, training and the resources at their disposal. Due to this individual traders will usually prefer to deal in predictable markets where it will be easier to assess the stocks direction.
To be a day trader you need to have access to a trading platform, such as IG Trading, Trading212, eToro etc. These platforms will enable you acces to multiple markets and commodities, all have their pros and cons, offering features the others do not.
Traders will also need access to news that can affect stock prices, and we cannot stress enough the importance of finding the right news sources. This is extremely important for a day trader, to have access to all the important news sources. It is so important that many traders feel it is one of, if not the most important aspects of day trading, as news sources can provide traders with crucial information needed to capitalise upon opportunities.
Some believe that it can pay off to tune into a finance based channels such as Bloomberg etc, which offer news articles, analytics, expert opinions, etc. however be careful not to let this type of media affect your emotional state as it can quickly turn sour.
Trading software is cruical to day trading, as ultimately you need to have the live and up to date information allowing you to trade effectively. The software helps traders interpret trends and understand how a certain stocks can move. There’s plenty of analytical software to choose from, we’re a big fan of TrendSpider and ProQuant which offers some amazing functionality. The key features include automatic pattern recognition enabling traders to identify technical indicators involved, such as flags and channels. The software also allows traders to interpret complex indicators, such as the Elliot wave pattern.
For day traders who want to employ a little more complexity then, the use of genetic and neural applications could be considered. These are programmes that make use of neural networks, and genetic algorithms to come up with more accurate predictions of future price movements. These applications are often meant to integrate with your broker and allows for a instantaneous and automatic execution of trades. ProQuant offers the ability to do this with IG Trading. This type of automatic trading can help to eliminate any emotions that might arise during trading and also improves execution times.
Another offering from ProQuant is Back Testing. This helps traders to assess and theoretically test their strategies. A back test will show how their particular trading system would have done in the past, which can guide to how the system will do in the future. However, it’s important to understand that stocks might not always follow the same patterns as they did in the past.
These tools can help traders in a big way, as they will can better predict price momentum. If inexperienced traders engaged in day trading without making use of these indicators, then they can end up losing money.
Ultimately if you want to go ahead and day trade for a living, there are a number of things you need to be aware of, and a number of tools at your disposal. If you aim to be an institutional trade then you’ll need to get in with a company and acquire the appropriate qualifications. If you want to do it for yourself, then you’re gonna need to get your foundations sorted first and foremost.
