Mistake: Make Money Day Trading (System Not Compatible)
Make money day trading. Don’t kill profitability with a lack of funds.
Two things that have nothing to do with a trading system itself can affect trading in a significant way:
Market Being Traded
Some systems claim to see the same results regardless of liquidity or which market is being traded, but the only way for this to be true is for the trader to have a significant account funded from the beginning.
The truth is that profits are capped by these two principles in every market. On one hand, Forex market caps are traded in billions of dollars. In contrast, traders being capping out at around $5,000 in futures markets.
How to make money day trading, even with Forex caps.
Around $3 trillion is exchanged in Forex markets on a daily basis. Because of this, many traders will never have to worry about caps in terms of profitability. However, minimums balances do still exist, albeit usually at a relatively low rate.
Many brokers offer what is called a “micro account.” These allow traders to open a trading account for as little as five dollars. These offers usually charge more in spreads, but make trading available to just about anybody.
Typically, brokers prefer a normal account to start around $500. These accounts offer lower pip spreads, but keep in mind that profits are taken at the beginning by setting you however many pips behind your entry to pay the spread difference.
How to make money day trading, even with Futures caps.
The Futures market isn’t for everyone due to a required minimum standard balance set by the Commodity Futures Trading Commission (CFTC).
First, it’s important to remember that most brokers will not allow you to open an account with less than $5,000. In addition, contract margins can vary from $500 to $6,000 per contract traded. These parameters are set to prevent losses that traders aren’t able to cover.
The Futures market is also a little more unreliable in terms of liquidity. Take the S&P 500 vs. Silver Futures for example. The S&P involves many more traders, which means there is more opportunity in the market to make profits without “slippage.”
“Slippage” is defined as a change in price which occurs due to a lack of participant reaction instead of an abundance of it. When these markets slip and there isn’t enough traders participating, your trade must wait until the prices moves far enough to pull you out completely.
In turn, this can result in huge losses and/or little profit.
Conclusion: how to make money day trading.
In conclusion, while Futures markets remain a great place to trade, please make sure you have the correct knowledge and experience to correctly navigate the practice. A good place to start is to make sure you know about specific trade times and overnight margin requirements.
The best type of educator of trading system will already have direction on which market fits your individual financial situation and the leverage at which you should be trading.
How to make money day trading with DayTradeFEED.com!
This article is only part five in a series aimed at helping day traders understand what mistakes to avoid.
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