I’ve been day trading for the past few years and wanted to share my tips on ways to day trade with only $100 to your name. It’s definitely possible, but it may require you to make do extensive research and find a method that works.
Ideally, you’ll want to have at least $25,000 in your brokerage account, in order to become a pattern day trader. A pattern day trader means you trade four or more times in five business days and have less than $25,000 in your account.
If you have more than that amount, you can day trade as much as possible. But if you are just starting with $100, how is that possible?
Who is a Day Trader?
A day trader is someone who trades with the idea of making money on the same stock within the same trading day. It’s not free money though, day traders must monitor prices closely and make quick decisions to buy or sell stocks/options/ETFs (any assets traded with an exchange). This form of active investing is different than long-term investing, which is more for people who want to let their money grow over time.
For example, let’s say you buy 100 shares of ABC Company for $10/share with $1,000 and the stock goes up 5%. This will give you a profit of $50. If you held onto these stocks until the next day, your $1,000 would now be worth $1,050.
Now let’s say you buy 100 shares of ABC Company for $10/share with $1,000 and the stock goes up 5% in a few minutes, but five minutes later it starts going down. You have to sell your stocks as soon as you can to cut the possible loss before the price hits the bottom.
Day trading is a very stressful job and I highly recommend that you don’t take it on unless you’re sure that this is what you want to do in the long term.
Can You Day Trade With $100?
It is feasible to trade with only $100. However, in order to profit, you’ll need a solid plan and a competent broker. As a result, before you invest any money, you should do extensive research and perform preliminary calculations to verify whether you’ll make any money.
So, how can you do it? The following steps will teach you how to start day trading with little money while still making and saving money.
Best Tips on how to Become a Day Trader with $100
1. Conduct a Self-Assessment
How much time you can dedicate every day to analyze the markets and make trades? Are you willing to invest all your free time into becoming a trader? This is crucial because even though you only have $100, your goal should be to make as much profit as possible by investing as many hours as you can.
2. Get the Right Brokerage Firm
Not all brokerage firms are the same. Some charge high commissions, while others offer free trades. Make sure you get a broker that is not going to take away your money. In addition, make sure they have an app for your mobile phone so you can make trades from anywhere possible at any time. This will allow you to buy and sell stocks whenever you want without having to rush home just to make a trade.
Oftentimes, brokerages will also offer lucrative signup bonuses. Robinhood offers a free stock worth up to $225 for joining. The Webull sign up bonus takes the cake, you can get up to two free stocks worth up to $1,400 for joining the investing platform.
You should also make sure your broker offers margin trading, which allows you to borrow money from the brokerage firm (up to 50% of your deposit amount) and invest it in stocks/options/ETFs. When you use margin trading, the money will act as your money, not your broker’s. That means the brokerage firm is at risk if you end up losing it all, but if you have a stock portfolio tracker you will be able to monitor all your purchased stocks and avoid losing money.
3. Choose Securities to
Next, pick the stocks you want to trade. You should start by investing in stocks that are not sensitive to economic factors, which means they will probably go up whether the Dow Jones goes up or down.
Examples include utilities and consumer staples. Watch out for warning signs like news of a dividend cut or CEO leaving the company, as these are signs the stock’s price could soon drop.
4. Get a Strategy and a Plan
Once you have your broker and securities, it’s time to come up with a day trading strategy. While every day trader has their own strategies, there are some that are more effective than others. Some basic options include:
Directional trading – This is the most common way to trade stocks by choosing whether you think the stock will go up or down within a short period of time.
Options trading – This technique is more complicated and risky, but it allows you to make money off the price movements of an asset without actually owning it. For example, instead of buying 100 shares of XYZ Company for $10/share when the stock’s price goes up 5%, you can buy a call option for $0.2 and let the broker sell it to someone else when the stock’s price goes up 5% in the next few minutes.
Scalping – This strategy is based on making small but frequent profits through quick and consecutive trades. Essentially, scalpers open and close a trade in seconds to take advantage of the smallest moves in the price of a stock. The main idea behind scalping is that even if you miss out on large gains due to the quickness of the transactions, you’ll still make a large number of small gains that will add up to a decent sum.
5. Stay Motivated and Dedicated
Finally, it all comes down to your dedication and motivation. Day trading takes time and dedication – you can’t expect to quit your full-time job tomorrow and start making money trading stocks. Not only that, but you’ll have to stay motivated even when the market is against you. If your mental state is weak or inconsistent, then there’s no way you can continue being a good day trader.