I often get asked how much money is needed to start day trading. Unfortunately there is no simple answer to this because everyone has different financial situations including bills, income and many other factors.
If you’re looking to test the water then you can start with as little $1,000 at a broker like TradeZero but if you are seriously looking to day trade for a living then you need to commit enough capital for draw downs and time to work out the kinks for at least a year.
A day trading career has many attractive features: you are your own boss, you set your own hours, you avoid dealing with difficult people, you can do it from the comfort of your own home, even in your pajamas if you want…the list goes on and on.
That said, unless you are making eye-popping returns with little downside risk, you will require a reasonable amount of starting capital just to be able to pay your bills and meet your responsibilities from your trading returns, never mind being able to save up for an early retirement on a tropical paradise.
So how much money do you actually need to start a career as a day trader? How much starting capital will let you live comfortably and securely without the need for a regular job?
Let’s take a look.
Don’t Quit Your Day Job
Fortunately day trading for a living does not need to be a binary decision that you dive into head first without looking back. It is far more sensible to ease yourself into the life, and slowly build up your day trading skills and your trading account until you are confident and financially secure.
Trading as a profession scales very well. From thousands of dollars to tens of millions, there are trading systems and techniques that are appropriate and profitable at every level.
Start off small by trading for a few hours each day. As your trading skills and account size grows, you will be able to increasingly rely on your trading income and scale back the time you spend at a regular job. Start taking on contract or freelance work, which will allow you to set your own timetable and focus on your trading, while still having a secure source of regular income.
Before you transition to day trading completely, be sure that you have enough money saved up to cover your expenses for a year if your trading fails to create a livable income.
Work Around the US Day Trading Limits
Pattern Day Trading rules require that you have at least $25k in your account before you can use it to day trade. Fortunately there is a way that you can start building your skills and growing your account through day trading long before you reach the $25k minimum.
However, if you deposit just $25k and lose money bringing your account below the requirement then you won’t be able to day trade. So you will have to leave yourself a cushion.
The globalization of the financial industry has allowed the development of trading platforms that exist outside the regulation of US law. While these platforms meet all the international standards for regulatory compliance and account security, they are not subject to the US $25k minimum regulation.
Therefore, US residents can use these non-US brokers to avoid this day trading rule and start a day trading account with as little as $1,000.
Suretrader, for example, will let you day trade with as little as $1,000 USD in your account. These brokers also offer higher margin levels and access to a much wider range of securities than traditional retail brokers.
Start Small and Build Your Day Trading Career
All it takes to start day trading as a career is as little as $1,000 and the will to learn. Start off small, and slowly transition to day trading as a career as you gain skill, knowledge, confidence, experience and capital. Soon enough you could be living the day trading dream, whatever that means to you.
The important thing to remember here is that you need to give yourself enough time to master your trading strategy. For some traders it can take a few months while others it will take well over a year.
That is why it’s a good idea to have a side gig for some extra cash while learning or have enough cash set aside to cover living expenses for at least a year. Its fine to test the waters with a smaller account and work on building it up as long as you understand that you won’t have as much buying power and you will have a smaller cushion for draw downs.
If you have any questions about starting a day trading account, let us know in the comments below!