What You Need to Know Before Quitting Your Job to Become a Full-time Day Trader

How Do I Prepare Myself For A Full-Time Day Trading?

When we start investing in the stock market, we necessarily think about our strategy to win in the markets. And Exness CFD forex broker is able to show you all the opportunities!

Depending on our temperament (impatient or not), our lifestyle (how much time can I spend trading per day?) or our knowledge of products (stocks, derivatives, etc.), we must choose at some point whether we wish to place our money in the short or long term.

This article will therefore allow me to explain the concept of day trading and encourage novices to think about what is best suited to their profile.

Betting on very short-term market volatility and investing money for the long term do not require the same type of investment. 

Many investors turn to derivatives such as CFDs, forex or Futures to speculate in the short term.

Day trading is a time-consuming method. If you have a full-time job, a family to take care of or even other projects at the same time, your obligations may not allow you to approach the markets with this in mind.

It is not enough to press the “buy” button at the beginning of the day and to sell at the end of the session to succeed. Indeed, each period preceding the opening of a new trading session requires some time to prepare your strategy and your key levels on this or that medium.

Even if there is the possibility for a trader to set up an automatic sell order in order to close a position without having to remain constantly in front of a screen, one has observed this when talking to many of them on stock exchange forums, which a large number of individuals prefer not to put on or position them at a distant distance, in order to manually unwind a trade. 

The risk in this kind of approach is that you will no longer be able to get out of your position if an external factor occurs (power cut, lack of temporary internet connection, etc.).

The day-trader is therefore often faced with this type of unforeseen event. This happens, for example, by buying a 4G key, a secondary laptop or even the use of the neighbor’s wifi (after acceptance on his part of course).

Internet reception by fiber to avoid any latency linked to the reception of the flow, the purchase of several screens to follow the course of several underlyings at the same time or even the subscription to certain services (advanced graphic platform, foreign flows, etc.) obliges the day trader to spend a little money before eventually earning it.

It suffices to see the large number of courses and methods taught on the internet about day trading (see scalping), in particular through technical analysis which consists of observing the graphic evolution of the price of an asset through a or more indicators, to realize that a person who is new to the markets and wants to start investing in the short term, is overwhelmed with information.

Unlike a long-term strategy where price fluctuations have no impact on a daily basis, here the investor must constantly question himself and know how to materialize their losses quickly in the event that the price does not go in the direction desired, under penalty of ending up with a capital loss that is difficult to collect.

It may seem simple on a demo account, but in reality, closing a losing position is far from easy. So when it comes to sometimes chaining several losses on the same day, the consequences on a trader’s mind can be significant.

An excellent study carried out by the AMF (Financial Markets Authority), thanks to a sample of more than 10,000 clients trading forex and CFDs over a 4-year interval (2009 to 2012), that an individual who carries out 250 orders or more per year (i.e. at least one transaction per day) comes out with an average loss of €18,741

It also shows that the more trades investors make over a given period, the greater the amount of their losses.

Moreover, the conclusion of this study shows that out of this panel of investors on their own account, nearly 9 out of 10 individuals come out the losers. However, it would be interesting to know if it is not rather the use of too much leverage and the difficulty of closing a negative position that would be the cause of these poor statistics.

Terms and Requirements Needed for a Successful Full-Time Day Trading

In order to be successful as a Forex day trader, you need to have good capital and a good knowledge of the market you are trading in. You also need to download a reliable platform, such as mt5. However, this does not necessarily guarantee success. This is especially true when prices fluctuate wildly during intraday Forex trading.

Forex day trading is usually used to eliminate the need to pay fees to keep a position open overnight. These fees are called Swaps. In some cases, the Swaps could be positive. A strategy based on the acquisition of assets with positive Swaps is called Carry Trade

Day trading is the buying and selling of assets, but only during the same day. Trades during this day can take place in any market, but it most often happens in the Forex market with currency pairs, or the stock market, with indices.

The day trader takes advantage of the small price movements of the day, by speculating during the session, but closes all his positions before the end of the day, not carrying over any open position to the next day.

The phenomenon, used by Forex day traders, is to take advantage of both upward and downward movements and generate profits in the meantime. In intraday speculation we usually look for a stock, a stock market index or a currency that is very liquid.

For other considerations, this strategy is an excellent stock market investment alternative. Indeed, trading during the session eliminates interest payments in commercial transactions, which only take place if the position is maintained overnight.

From What Type Of Trading Its Better To Begin

The first step to becoming a profitable day trader in the Forex market is simple and not much different from other trading strategies. 

As a beginner, it is advisable to practice day trading with virtual money on a demo account to learn about how the Forex market and this approach works before engaging in Forex trading with real money. It may seem too simple, but it is vital.

Carry Trade

This method is reserved for a more experienced, informed public, because it is a little more complex.

It consists in using the difference in the interest rates of the currencies between them to carry out a profitable operation, without taking into account market developments.

And in practice? You have to buy a currency with a low interest rate and then sell it for a currency with a higher interest rate. Before getting started, it is therefore essential to identify the currencies with high and low interest rates. 

The spread practiced by the broker is also to be monitored, so that it does not swallow up all the gains. You may always do this when trading online with Exness broker.

The Trend In Session Trading

Trend following in trading is a simpler and less risky strategy for a beginner trader. The speculator will seek to find strong enough movements with large volumes and follow the trend. As the saying goes: the trend is your friend, or in English, trend is your friend.

A high level of discipline, however, is still necessary even in momentum trading, to be able to wait for the best opportunity to enter a position and solid control to be able to stay focused, as well as to identify the right market exit signal.

The Reversal In Intraday Trading

Contrary trading is arguably one of the worst strategies to adopt, especially when used by unsophisticated traders.

This technique is also known as pull back trading. A countertrend trader must not only be able to identify temporary changes in price direction with high accuracy, but also be able to predict their strength. Although not impossible, it requires a lot of experience and knowledge of stock trading.

Day trading has often been described as the fastest way to make money in the stock market. However, what the ads fail to mention is that this is one of the hardest and riskiest strategies to master. As a result, many novice traders fail and lose their capital.

Be Ready For Ups and Downs

Since the markets can only move a certain number of points in a session, intraday traders use relatively riskier CFD trading techniques to rack up their profits. CFD day trading strategies are rather Price Action strategies and require the trader to be in front of his screen most of the time during a session.

It is widely recognized that the smaller the time frames a trader is working on, the more risk he is likely to be exposed to. This is why day trading can be described as one of the riskiest approaches in the forex market, less than scalping, but more than swing trading.

It’s not really the strategies traders use in day trading that are more risky. In fact, the overall logic is the same for almost any time interval. 

Rather, it is the rules that become more difficult to follow in online day trading and they become ruthless with those who do not follow them. Mistakes are more costly and they have the potential to happen more frequently, since one may be tempted to trade more often.