Home Trading is a practice that many consider to be a high barrier-to-entry field. While there is some merit to this assumption, it is not entirely true; at least, not in today’s market. That’s not to say that anyone with a lot of ambition and patience cannot trade. Moreover, it does not mean that they can’t do it for a living. They can, even if they have little to no money.
In a time where people have no choice but to work from home, trading for a living certainly does sound appealing. For those who no longer have a job thanks to the virus outbreak, trading for a living is especially enticing.
What is day trading?
Because you will see it frequently in this article, let’s take a quick look at what ‘day trading’ is.
This practice is the purchase and eventual sale of a security within a single trading day. Basically, it is what happens when you open and close a security position in one day’s time. Most of the time, this will take place in almost any marketplace. Here is a break down that simplifies the explanation:
- Open and close (round trip) – By “open and close,” we mean buying and selling. In the case of short sellers, it is selling (short) and then buying. An alternative name for this is ‘round trip’.
- Security position – Day trading applies to pretty much all securities, like stocks, bonds, ETFs, and even options (calls and puts).
- Same day – If you carry out a round trip on the same day, then it is technically a day trade. By holding your security position well beyond the conclusion of the trading day, then it is not a day trade
In addition to day traders, there are also ‘pattern day traders’. These are people who make four or more day trades within a rolling five business day period. Those trades typically make up more than 6% of your account activity in the span of those five days.
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At the risk of stating the obvious, technology is always changing and this has various effects on certain fields. Because of this, there is also an increase in volumes on exchanges. This, as a result, is triggering a number of very low barriers-to-entry trading careers. There are some cases where there is no requirement for personal capital. For others, there is a requirement for capital to get you started, but only a small amount. With this, you can properly verify your commitment to trading.
Can the average person trade?
There is a common misconception when it comes to full-time traders. Many people believe that traders working full-time with advanced degrees, as well as high pedigrees, work only for investment banks. Another common assumption is the thought that, if you want to trade, you need large amounts of capital. Not to mention the expendable time that you are willing to dedicate to the practice.
The first option is arguably the easiest due to how flexible it is and how you can mold it around your daily life. That is trading from home; in other words, trading independently. However, as easy as it appears, day trading stocks from home are also among the most capital-intensive arenas.
This intensity comes from the minimum equity requirement for a trader who is a pattern day trader is $25,000. It is important that the maintenance of this amount be as consistent as possible. If the trader’s account falls below it, they will not be able to day trade. That is, not until the minimum equity level undergoes restoration by depositing either cash or securities.
Over time, proprietary trading firms would become very attractive thanks to their training programs and low-fee structures. Are you not entirely sold on the idea of trading from home (i.e. independently)? If so, then working on a trading floor might sound more appealing.
Hype behind ‘Machine Learning’
When it comes to trading for a living, there are some mistakes you can make. One of which is falling into the trap of ‘Machine Learning’; specifically, the hype behind it.
Machine Learning applications are a recurring thing that you will frequently come across. The media loves them, people do not fully understand them, and investors refer to them as “buzz words.” The main issue with Machine Learning is that it is incredibly tough to apply in trading. In fact, when you think about it, Machine Learning is more of a filtering method rather than a decision-making tool.
As soon as you decide on which trading method best suits you, the next step is important. If trading from home is something that interests you, then you need to pick the markets you will trade. And you must do so by basing your choice on your capital and interests. Afterward, you must create a comprehensive trading plan, which doubles as a business plan. Trading is your business now, anyway. And, of course, you must decide how you will operate as a trader.