Some people are interested in day trading as a profession and want to know how to prepare themselves.
These steps may or may not be helpful for day traders already employed at banks, so they can upgrade their skill set to become independent traders.
Nevertheless, we hope this guide can help everyone understand what it takes to become a day trader.
Requirements to Trade Full-Time
A full-time day trader needs around HKD 400K (USD 53K), which includes the average annual salary of a first-year analyst (HKD 470K / ~USD 60K). This amount should cover your expenses for one year.
Of course, if you have more capital, you’re able to improve your trading strategy or hire support staff.
What is Technical Analysis?
Technical analysis studies past market data and uses it to determine how to trade in the future.
It’s the most common method for financial traders worldwide—it doesn’t work all the time, but some people still rely on it to become rich.
Day Traders Commonly Use Technical Indicators
You can find a more detailed list here. And if you’re interested in learning technical analysis, try reading these books:
- Technical Analysis of Stock Trends by Robert D. Edwards and John Magee
- Encyclopedia of Chart Patterns by Thomas N. Bulkowski
What is Fundamental Analysis?
Fundamental analysis studies the overall health and prospects of a company to decide whether its stock price would go up or down in the future.
This method doesn’t work well for short-term traders – it requires too much time to analyse every piece of information about a company before actually buying its stocks.
Fundamental Indicators That Day Traders Commonly Use
Here, you can find the most fundamental indicators (EPS, P/E ratio, dividend yield, etc.).
It provides financial data on almost every public company in the world. Use it to get an idea of where you’re going to trade.
Learn Technical Analysis
Many books can teach you how to read charts, but practice is the only way to master them.
Instead of focusing too much on theory (which is usually dull), try finding some websites or forums where you can post your chart and ask for help.
If anyone replies, spend time analysing their suggestions and start trading with them in mind – this is the best way for beginners to learn.
What Software/Hardware Do You need?
You don’t need any specialised equipment – just access to financial data through Saxo
They provide professional charting tools.
We’d recommend everyone use a Mac – its operating system is much more stable and efficient than Windows.
Most day traders in Hong Kong use GWM / ICBC (if they can get an account). For about USD 100K, you can open a trading account at a Chinese broker that provides direct market access to US exchanges.
Becoming a Day Trader
There are many ways, but this is how it works: first, you need experience. If you already have an account with Saxo, try trading as much as possible without actually losing any money – do your analysis and keep a written record of every trade.
Second, start learning from other traders by reading books/blogs or forums like PSDTalk and looking at stock indices. You may also want to pay for lessons from a professional if necessary (but always check their reputation before doing so).
Lastly, you can apply for a trading job at a hedge fund or other financial institution that provides direct market access.
For example, my friend went through a several-month-long interview process and finally started working at a $100 billion Hong Kong-based hedge fund.
Is There Any Other Way?
“This is too much work, and it won’t be worth my time if I cannot make money in the short term.”
Short-term trading usually requires large amounts of starting capital, but you can try forex instead – it may allow you to trade with smaller sums.
Day traders in most countries use European brokerages because their markets are more mature and provide better liquidity (meaning that they have lower spreads)