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March 21, 2019

The Secrets of Being a Full-Time Day Trader

If you’ve played around with trading on a part-time basis, you may eventually reach a point where you want to trade full-time. And while it’s certainly an opportunity, it comes with its own set of unique challenges. Being prepared for these challenges will make the transition much smoother.

6 Challenges You May Encounter

Ubiquitous online access to financial markets has made day trading a possibility for anyone, anywhere. But there’s a difference between doing some trading on the side and becoming a full-time day trader. Your situation will be highly unique, but don’t be surprised if you encounter challenges like: 1. Friction Working From Home

It’s becoming more normal to work from home, but there’s still friction when your work life and personal life converge in such a familiar setting. Being prepared for these issues will help you handle them with greater ease.

One of the more common issues for at-home day-traders is figuring out where to establish an office. You need a workspace that’s private and large enough to house several computer monitors. If all of your bedrooms are already being used, you’ll have to get creative. One option is to convert your garage into an office and then use a standalone carport to store your vehicles.

Your spouse, children, or roommates will be another point of friction that will have to be worked through. Establishing clear boundaries will help you stay focused.

2. Technology Problems

Your internet connection might be good enough to stream Netflix and browse social media, but is it reliable enough to support your day trading?

“When you day trade you need a high download speed to receive market data and you need a decent upload speed to put in your orders,” day trader Marcello Arrambide writes. “If you don’t have a high enough download speed then you won’t receive the market data quick enough to make informed decisions.”

Addressing technological issues on the front end will make the transition to full-time day trading much more efficient and far less frustrating. 3. Navigating Fees and Charges 

As a day trader, brokerage charges and fees can eat away at your profits. In order to maximize your earnings and limit your expenses, you should work with a broker that fits your strategy.

If you’re only conducting a handful of trades per day, a per-trade basis brokerage plan is appropriate. But if you have a high daily trading volume, staggered or fixed plans are more advantageous.

4. Dealing With Fluctuating Income

If you’re coming from a W-2 job where you made a consistent and predictable income, you’ll have to adapt to your new career. While all self-employed individuals have a degree of unpredictability in their incomes, your earnings will fluctuate rather dramatically from week to week. Learning to budget accordingly can help you make smart decisions with how you spend, save, and invest your income.

In the early days, you may find it helpful to pick up a small part-time job on the side. Having a few hundred dollars of predictable income each week will give you something to fall back on during bad weeks. 5. Explaining Your Job 

Be prepared to get confusing looks when you tell people what you do for a living. The day trader title simply isn’t in most people’s vocabulary. The average person will look at you like you’re crazy and may even question the legitimacy of your job. Don’t worry about it, though. You don’t need their approval anyway.
6. Obtaining Financing

Speaking of explaining your job to others, you’ll find it challenging to obtain financing should you need a loan for something. For example, mortgage lenders are hesitant to give out home loans to self-employed borrowers who (a) lack at least two years of tax returns and (b) earn income in a field that’s considered risky or volatile.

If you want to buy a house or secure a loan, do so before quitting your job and becoming a full-time trader. It’ll make the process significantly easier.

Put Your Best Foot Forward

As is the case with any career change or pivot, you’ll encounter issues along the way. The key is to view them as speed bumps and not impenetrable barriers. Proceed with caution, but never be deterred. If full-time day trading is something you’re interested in doing, you’ll have to fight to make it a reality.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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