How To Become a Day Trader (With Steps and Duties)

A day trader purchases and sells stocks using the stock market with the goal of maximizing their profits. Day trading has the potential to offer competitive pay and flexible work hours. If you have experience trading stocks and want to work with more competitive transactions, you might consider becoming a day trader. 

In this article, we explore what a day trader career is like and review steps you can take to become a day trader.

Key takeaways:

• Day traders monitor the stock market closely and make same-day stock purchases, sales and trades.

• Working in this profession requires monetary investment and financial risk, but it can also bring in profits.

• Day traders can work as self-employed traders or as employees of a financial institution.

What is a day trader?

A day trader is an investor who buys, sells and trades stocks in transactions that take place within a single day. While there are many job titles that relate to trading stock, an individual only qualifies as a day trader if they trade four times or more over five days. Day traders can work for themselves or for financial institutions that hire them to trade.

They can perform many of the same duties as a general trader, but day traders have a higher personal equity requirement, which is typically $25,000. This means that day traders usually begin each trading day with at least $25,000 to ensure they can cover any losses they experience.

Related: What Is a Day Trader? A Definitive Guide (With Job Duties)

What does a day trader do?

Here are some of the most common job duties for a day trader:

• Tracking trends in the market daily

• Conducting trades that have a quick turnaround

• Funding trades from their personal accounts

• Purchasing stocks they believe might perform well

• Selling stocks they think might drop in value

• Understanding different financial securities

Related: 16 Trader Skills To Develop for Success

Work environment for a day trader

Many day traders work independently and conduct trades without the help of an investment firm. These day traders often work from home or in places where they can access the internet, such as coffee shops or libraries.

Some day traders work for day trading firms, where they perform transactions alongside other day traders at a central location, typically an office. While day traders can work very flexible hours, they still often work every day so they can take advantage of new trading opportunities that appear daily and respond quickly to changes in the market.

Related: How To Become a Professional Trader (With Salary and Job Outlook)

How to become a day trader

Here are some steps you can follow to start your career as a day trader:

1. Open a brokerage account

A broker is a person or company that performs trades for other parties, usually investors. Because brokers research and conduct the actual trades, they often have access to information about trends in the market and the performance of different stocks.

Because of this, having an account with a broker can open you to more information about the stocks you might trade, such as charts that show certain stocks' movements. It can be most common for independent day traders to use online brokerages that give them the ability to perform trades on a website or mobile application.

Related: Everything You Need To Know About Becoming a Stockbroker

2. Ensure your account meets the equity requirement

The Financial Industry Regulatory Authority (FINRA) dictates that the minimum equity requirement for day traders is $25,000. Because of this, it's beneficial to make sure that you have enough money in the bank account you plan to use for day trading before you begin. This can make adhering to the day trading regulations simple and protect you from large losses, as having this amount of money available can help you cover any risk.

Related: 17 FINRA License Certifications To Earn as a Finance Professional

3. Conduct at least four trades within five days

Another key aspect of being a day trader is performing at least four trades over the course of five days. While it can be common for day traders to trade over four times a week, this can be an effective place to start while you're still practicing opening and closing trades quickly.

Many day traders frequently open and close trades within the same day. Because of this, conducting as many trades as you can when you first start your career can help you reach a level of expertise where you can complete same-day trades as well.

Related: Should I Be A Day Trader? 7 Reasons To Pursue This Role

4. Verify that your day trades make up over 6% of your total trades

Another requirement that most day traders have is that their day trades make up over 6% of their total trades for the week. This means that even if you perform other types of trades that take long periods of time to complete, it's important to perform enough day trades to meet the 6% quota. You can keep track of what percentage of your trades these transactions make up by using a spreadsheet and basic calculations.

Related: 10 Stock Analysis Tools (And Why They're Important)

5. Consider joining a day trading firm

If you want to become a day trader without making such a substantial personal investment in your trades, you can join a day trading firm. These firms employ day traders to conduct transactions from their offices and typically have more lenient requirements for them. For example, firms often have specific software and day trading tools that might make simplify trades, and joining the firm grants traders access.

Related: How To Create a Day Trader Resume (With Template and Example)

Salary and job outlook for a day trader

While specific salary data is unavailable for day traders, the national average salary for traders is currently $82,922 per year. Take-home pay for day traders can vary widely depending on the success of their trades. Traders who buy at low prices and sell much higher may earn more in profits than others, and earnings can depend on the state of the market.

While the U.S. Bureau of Labor Statistics doesn't have job outlook data specific to day traders, there is information about securities, commodities and financial services sales agents, which could include day traders. According to the bureau, the employment of individuals in this field could increase by 10% from 2021 to 2031. The bureau states that this growth might result from an increasing number of positions that open when employees retire from the industry.

For the most up-to-date salary information from Indeed, click on the link(s) provided.