This is a very popular question amongst people who are considering Day Trading online as a business.
To answer this question it really all depends on what sort of Day Trading you are looking to do. If you are considering Day Trading online then you may want to trade more leveraged instruments such as Options Futures contracts CFDs..(Contract For Difference) or Forex....(Foreign Exchange) rather than just stocks.
The main reason for this is that to Day Trade stocks you are probably going to need a trading bank of at least $20,000 minimum and if you are planing on being in and out of a trade within the one day then you may not get enough movement in the price of the stock to warrant Day Trading it.
With Futures you need about $10,000 in your account to cover the size of the actual futures contract and also you need to have enough left in the account to cover the position to avoid getting a margin call. A margin call is when you do not have sufficient funds in your account to cover your exposure to the market movements in the position you have opened.
With options you need a little bit less you can trade options with an account with as little as $1000 but to give you some breathing room you really need about $5000.
The same would apply with CFDs. Like a futures contract you need to have sufficient funds in your day trading account to cover your exposure to the market movements in the position you have opened.
With Forex you can open a Forex trading account with as little as $500 but once again you still need to have sufficient funds in the account to cover your exposure.
However if you are starting out in day trading and you have limited amount of funds you are prepared to risk on the market day Trading you would be well advised to start with Options, as your exposure is clearly limited but you can still benefit greatly form the amount of leverage offered through option contracts.
Regardless of which instrument you decide to Day Trade you must have a trading system that you can follow that will give you the confidence to Day Trade. And before you go live with that system you must first back test it to see if you are comfortable with is and that it will give you a profitable win loss ratio.
And yes you will have losses, but in Day Trading as with any trading the losses do not matter too much as long as they are cut short and that you have far more wins.
Having established your Day Trading system and settled on the particular instrument you want to Day Trade the next most important thing you need to be aware of is the amount of money your are prepared to risk, the most you should ever place on a trade is 10% of your trading bank. When day trading or any period of trading you should never place more than 10% on the one trade no matter how confident you are.
The other thing you also need to be aware of in Day Trading is to never dollar cost average. This means if you enter a position and it goes against you which is sometime common when you enter into a position because there can sometimes be a bit of retracement before the trade starts to go your way, you should never buy more of the stock currency or what ever it is you are trading in the hope to make up some of your losses in the event it starts to move back in your direction, because I can tell you it can become a recipe for disaster.
Having said all this one of the best things you can do for your Day Trading education is to view a live trading videos of a trade as it actually happened.
Hil Smith is the author of http://www.tradingslingshot.com which is a website with free educational material for online trading.
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