Thinking about becoming a day trader? I know I have. What’s easier then clicking the mouse button, waiting ten minutes, clicking it again, and realizing a $300 profit? Heck, if you can do that once a day, that’s $6000/mo. You can quit your job, build a man-cave, and spend the rest of the day flying remote-controlled helicopters while blasting the theme from Airwolf. It’s actually sort of ridiculous that you can make money this way. But it is quite possible. Let’s examine this lunacy a little closer and pick apart what exactly you need to get started day trading.

Let’s first get an idea of some of the things you’ll need as a professional day trader. I’m writing this from my experience as a semi-professional day trader so think of these as the bare essentials.

Overview

Startup Costs:

• Discount Brokerage Account - Ok, this one’s easy, go to tdameritrade.com and open an account.
• Computer Equipment $700 - You’ll need something capable of running two monitors (or four if you really wanna look like a jerk).
• Charting software $90/mo - I prefer Worden Telechart but there are hundreds to choose from and many of them are free.
• Subscription Service $50/mo - It doesn’t matter how good you think you may be, you will need advice from seasoned day traders and often the only place you will find objective, non-demeaning advice will be from a forum or chat room as part of a subscription service. I’ve found that the free investment forums and stock websites are totally useless.
• Capital - This is going to be the biggest barrier to entry. Insufficient capital is the number one reason most day traders fail. If I had to make a guess I would say that you need at least $50,000 to fund a small trading account. This has to be money that you’re willing to lose.
• Knowledge - You will need a basic understanding of business, capital markets, and our financial system as a whole in order to make sense of the Wall Street gibberish you will encounter as a day trader.
• Books $200 - If you’re like me you’ll want to know how other people managed to make a living as a day trader. While these “systems” tend to not work at all they can provide you with an array of tools that you can mix and match to figure out what works for you.
• Strategy - You can use what you learned from the books to form a trading strategy. It can pretty much be anything from trading stocks with symbols that start with the letter M to looking at stochastic crossovers and MACD histograms.
• Discipline - This is often overlooked but is probably one of the most important aspects of becoming a decent trader. What good is a strategy if you don’t follow it?
• Remote Controlled Toy Helicopter $30 - What else would you do while listening to the Airwolf theme? It would just be weird to have that blasting WITHOUT a helicopter buzzing around.
• Balls of Steel $Priceless - This may or may not be considered essential but day trading definitely isn’t for the faint of heart. If you’ve got a weak stomach you might want to look elsewhere.

Total for all essentials excluding initial capital - $1070 - Coincidently this fits right in to the 1KHT.

Advantages

Now that we’ve spent the requisite $1000 we can start day trading (and flying helicopters). For starters, you can forget going to a stuffy office all day. The biggest advantage of trading stocks for a living is that you can work from just about any place that has an Internet connection (Positano, perhaps). Furthermore, you don’t have to deal with any pain in the ass people. It’s just you, your computer, and the market. If you’re coming from a customer service oriented position you will appreciate this. Lastly, your profit is limited only by your abilities (or lack thereof); your skill will determine your paycheck. Sound compelling? Read on.

Disadvantages

No matter what anyone tries to tell you trading stocks for a living is extremely time intensive. Not only do you have to remain at your computer while the market is open (remember, you’re not making money unless you’re trading) but you end up spending several hours a day going over charts, watching investment related television, and listening to an endless number of pundits voice their opinions. You’re going to spend AT LEAST 9 hours a day “working” and it isn’t exactly stress free either. Trading can be VERY stressful when market volatility is high. Huge swings in equity prices can whipsaw day traders causing them to churn their accounts and produce little in the way of profits. Combine all of that with our natural tendency as humans to buy stocks when they’re up and sell them when they’re down and you can easily see why the majority of day traders get their asses blown out within the first few months. It’s just a lot of work

My Take

I suppose if you can handle the stress and time requirements, day trading can be lucrative. According to this CBS news article only 12% of day traders actually make money. However, the subject of the article insinuates that he can make almost $10k/mo as an independent day trader with about $250k in capital. That’s definitely enough to pay the bills. You might even have some money left over to buy a new toy helicopter every week as they have a tendency to break. Now that I think about it, maybe it’s easier to just sell toy helicopters that break after a week…more on that later.