Wooden Hut

"Frequently Asked Day-Trading Questions"

Is Trading Gambling?

  • The short answer is, "no." Obviously all traders do not lose money

  • However it can be very easy to lose money in the markets if you are not careful.

  • It's also important to remember that not all traders are making millions of dollars, buying yachts, and traveling the world.

  • While the glamorous side of trading can be motivating, it's certainly not the reality for all traders.

  • You've probably heard expressions like, "90% of traders fail" or "the stock market is just gambling."

  •  In fact, entrepreneurialism is generally glorified and praised in our society even though 50% of businesses will not make it past their fifth year

  • You need to educate yourself, do your research, and constantly analyze what you are doing right and wrong. There is no guarantee that you will make money, but you can do everything within your power to control the outcome.

How much money can I expect from trading?

  • This is one of the most frustrating questions because there is no definitive answer.

  • We get a lot of traders who are just getting started and looking for a strategy to make $100/day. This isn't the "make money online" niche and you shouldn't expect to make "$1,567/day from home with only 3 hours of work."

  • Theoretically, trading provides you with unlimited earning potential.

  • That said, you shouldn't put too much focus on the monetary aspect when you are just getting started. It's distracting and potentially debilitating. Remember, you can also lose money.

Where do I Start?

  • Step one towards becoming a trader is education. There's no way around it.

  • You need to put in hours and hours of research and analysis.

  • How you choose to educate yourself is up to you; everyone learns differently.

  • There are plenty of ways you can learn on the internet, from blog posts to YouTube videos.

  • We highly recommend following Ricky Gutierrez and Sean Dekmar to learn in-depth concepts about trading and becoming a consistent trader.

What trading platform do I use?

  • When you are getting started, use the platform provided by your broker. Most platforms do the same thing. They provide access to charts, scanners, level 2, etc.

  • ETRADE offers access to ETRADE Pro. TD Ameritrade offers access to ThinkOrSwim. SpeedTrader and Centerpoint offer access to DAS Trader.

  • These platforms are all relatively similar. If you have access to real-time data, candlestick charts, and level 2 screens, you have everything you need.

  • Choosing a platform often comes down to familiarity and personal preference. If you are unhappy with the platform provided by your broker, feel free to test other platforms and decide which you prefer.

How much money do I need to get started?

  • We recommend new traders have at least $3,000 in their trading account (ideally $5,000+).

  • This gives you room to pay for commissions, take losses when learning, and take positions where you can make decent profits.

  • Many traders come to the market with the misconception that you need over $25,000 to make it as a trader.

  • While you do need over $25,000 to bypass the Pattern Day Trader rule, you do not need $25,000 to trade.

  • Traders with under $25,000 will just be limited to three round-trip trades (buying and selling in the same day) within a 5-day period. 

  • Unless you use TdAmeriTrade in which they allow the option to use a Cash Account which allows you to use all of the money you have in your account and resets daily

What If I keep losing money?

  • First things first, remember that losses are a part of trading. Don't expect to be profitable from the start.

  • It's your job to take a lesson away from every trading loss. Losses are unfortunate BUT they give you the data you need to improve your strategy.

  • You should also focus on patterns as you place more trades. Focus on where you make/lose the most money and alter your strategy accordingly.

  • Here are some things you can focus on: 

  • 1) Long vs. Short Trades

  • 2) Momentum Trades vs. Swing Trades

  • 3) Fundamental Trades vs. Technical Trades

  • 4) Small Cap Stocks vs. Large Cap Stocks

  • 5) Chart Pattern A vs. Chart Pattern B

  • 6) Morning Trading vs. Afternoon Trading

  • 7) Low Volume Stocks vs. High Volume Stocks

  • 8) Stocks With Catalysts (i.e. News, Earnings, etc.) vs. Stocks Without Catalysts

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