Trading, the Promise and the Reality

August 31, 2011 in trading

I’ve been thinking about day trading for a few years, off and on. I admit to being inspired by my father and an uncle, both active and successful investors with very different strategies. Being fairly young and naive – I’ll admit that readily – I am leaning towards the “get rich quick” side of things. The promise of making a million dollars stands as an impressive and worthy goal, but one that can only be achieved, if at all, though the rigorous application of strategy and research in pursuit of a series of incrementally greater goals.

The first thing I’ve learned in researching day trading is that you can’t just jump in with $1000. You have to have at least $25,000. As stated by Wikipedia, a “pattern day trader is a term defined by the U.S. Securities and Exchange Commission to describe a stock market trader who executes 4 (or more) day trades in 5 business days in a margin account, provided the number of day trades are more than six percent of the customer’s total trading activity for that same five-day period. As the trader is exposed to the danger of day tradingand intraday risks and potential rewards, it is subject to specific requirements and restrictions.”

So the first test is accumulating $25,000 in trading capital. Everything else comes after that.