Trading can serve as a source of additional income for some, while others may choose it as a full-time career. As a trader, you can work for a brokerage firm or independently as a freelancer. Trading is an attractive career choice due to its competitive pay and flexible working hours. This article delves into what a day trader is, outlines the path to becoming one, explores the salary and work environment, and highlights the essential skills for a fulfilling career in trading.

What Is A Day Trader?

A day trader buys and sells securities within a single day, aiming to profit from rapid price fluctuations, sometimes even within seconds. Day traders use various techniques and strategies to exploit perceived market inefficiencies. They are often well-educated in trading intricacies and well-funded, with some introducing added risk by leveraging their stakes.

Day traders stay tuned to events causing short-term market shifts, and one popular approach is trading based on the news. Scheduled announcements, like economic statistics, corporate earnings, or interest rate updates, are subject to market expectations and psychology. Day traders benefit when these expectations are exceeded or unmet, leading to sudden and significant market moves.

What Does A Day Trader Do?

Day trading has the potential to become a lucrative career if approached correctly. However, it can be challenging for beginners, particularly those who need a well-planned strategy. It's important to note that even experienced day traders may encounter difficult periods and face losses. Day traders are susceptible to events triggering short-term market fluctuations.

A commonly employed technique is trading based on the news. Scheduled announcements, including economic statistics, corporate earnings, or interest rate updates, are influenced by market expectations and psychology. In other words, markets respond when these expectations are not met or are surpassed, often resulting in sudden and substantial moves that can be advantageous for day traders.

Day traders employ a variety of intraday strategies, including:

• Scalping: This strategy focuses on making numerous small profits on ephemeral daily price changes.
• Range trading: This strategy uses predetermined support and price resistance levels to determine the trader's buy and sell decisions.
• News-based trading: This strategy seizes trading opportunities from the heightened volatility around news events.
• High-frequency trading (HTF): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.

How To Become A Day Trader In 7 Steps

1. Complete Your Education

Many companies prefer candidates with a bachelor's or undergraduate degree in finance or related fields. Aspiring traders can gain an advantage by studying finance-related subjects such as economics or mathematics in college. Degrees like a Bachelor of Commerce (B.Com) or a Bachelor of BusinessAdministration (BBA) in finance can benefit those aiming to become traders.

2. Learning The Basics Of Trading

Grasping the fundamentals of trading is essential for navigating the stock market. Trading basics encompass process-oriented and data-driven elements crucial for success. It's critical to comprehend:

• The capital needed for trading.
• The concepts of bidding and asking prices.
• The principles of risk management.
• Techniques for monitoring trade performance.

Understanding these basics is instrumental in making informed decisions about the investment products you wish to trade.

3. Determine The Product In Which You Want To Trade

After mastering the trading basics, identify the product that aligns with your interests. Some options to consider include:

• Stocks: Investments representing ownership shares in a company.
• Options: Contracts allowing traders to buy or sell at a predetermined price on a specific date.
• Futures: Financial contracts enabling traders to buy or sell at a predetermined price on a future date.

Once you've selected a product, concentrate on acquiring advanced knowledge specific to that product. Advanced knowledge sets you apart as an expert in that area, going beyond basic understanding.

4. Develop Trading Techniques

Creating trading techniques is essential for establishing a rational and practical approach to generating profits in the market. Develop these strategies by analyzing historical charts and graphs and applying them in real-world scenarios. Additionally, seek guidance from experienced traders who can teach you proven trading strategies. This hands-on experience and mentorship contribute to a well-rounded understanding of successful trading techniques.

5. Gain Trading Experience

Executing trades in an actual market is crucial for applying theoretical concepts in practical scenarios. The aim of gaining trading experience is to comprehend the workings of trading and learn how to remain profitable and consistent. Making actual trades allows you to test and refine your theoretical knowledge.

Employers often prefer hiring traders with practical, real-world trading experience, as it demonstrates the ability to translate knowledge into successful actions in the dynamic market environment.

6. Understand Risk Management

Comprehending risk management is crucial for a thriving career as a trader. The capacity to recognize potential investment threats and devise strategies to mitigate them is vital for ensuring profitable trades.

Implementing a risk management procedure allows you to determine the opportune moments for buying or selling, which markets and moves to consider, and how to optimize investments. Understanding the risks you're willing to undertake for your client instills confidence. It enables more informed decisions in managing their investments.

7. Review Your Trades

Closely monitoring your trade's performance is crucial for identifying successful patterns in your strategy. Reviewing trades lets you discern which strategies are practical and understand the reasons behind profitable outcomes.

By pinpointing successful strategies, you can apply them consistently across your client's portfolio, ensuring a solid return on investment. This iterative analysis and applicationprocess enhances your trading strategy's overall effectiveness.

What Is The Salary And Job Outlook For A Day Trader?

According to the U.S. Bureau of Labor Statistics (BLS), the job outlook for securities, commodities, and financial services sales agents, which includes day traders, is expected to grow by 10% from 2021 to 2031. While the average annual salary specifically for day traders is unavailable, the national average for traders is currently $82,922 annually.

It's important to note that the take-home pay for day traders can vary widely based on the success of their trades. Day traders typically earn commissions on the purchases and sales they execute for their clients. Those working for investment banks or hedge funds often receive a salary. As reported by ZipRecruiter, the average annual wage for day traders was $94,315 as of May 2021.

The national average salary for a trader is ₹23,272 per month in India. The exact wage varies based on experience, qualifications, skills, types of trading, and location. Salaries can differ significantly between cities, with some offering higher pay. For example, the average salary for a trader in Ahmedabad is ₹16,905 per month, while in Chennai, it is ₹38,949.