Looking at Day Trading as a Business

If you are drawn to day trading as an alternative to working for someone else, then you’re not alone. There are many other people who would love to make an independent living out of trading the markets. Unfortunately, the majority who try to trade for a living fail in less than six months, and sometimes this is not just due to poor trading skills.

Of course, to succeed at day trading you must study and take a day trading course or two to make sure that you understand the fundamentals and can develop your own day trading plan. Nonetheless, it is important to remember that making a success of day trading is not as simple as having a day trading strategy that works.

It is surprising that otherwise rational human beings can lose their sense of direction when they are faced with the prospect of earning money from home. Perhaps it is the lack of an office environment that causes a casual approach which means that the exploit is not taken up with the proper care. Certainly, if you intend to open any other sort of business you would first be encouraged by your accountant to prepare a business plan which would spell out in detail cash reserves needed, projected income and outgoings, and would identify any weak areas that need further thought.

The topic of day trading should be approached in precisely the same manner. There are certain expenses to set yourself up for the exploit, and these include the computer equipment, additional screens and fast Internet hardware. There is also the ongoing fixed cost of the Internet connection and any other overheads.

Next you should calculate the monthly outgoings, which may include subscriptions to stock price feeds and Internet providers. Many traders who make a full-time business of it consider that Level II trading is a necessary addition, so that they can see the pending orders on the market.

For any business, the expenses and outgoings must be balanced against the anticipated income, and this is one area where many prospective traders may fail to plan adequately. Having a day trading plan, and back testing it thoroughly, you should be able to develop projections of the range of income that you can generate using day trading. You must be careful to be realistic about the amount of time you are going to spend actually trading, as there are many distractions  that can draw your time away.

There are several business plan templates freely available on the Internet, and using one of these will make sure that you do not overlook the details and incidentals. If you are going to day trade then you will not be able to have a regular job, and you need to make sure that you are set up for success from day one.