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Day Trading Capital

Day Trading Capital
How much capital will I need to start day trading for a living This is a very common question that we often receive and it is somewhat difficult to answer. That is because each individual is different and has a different set of goals Each persons standard of living could be different and what one individual makes with day trading for a living may not be enough for another.  The more money you want or need to make will depend on the amount of capital that you have at risk. 

Swing Trade for Percentage Day Trade for Dollars
The only answer is that it is different for each person and it is something you must consider for yourself before you start.  We can only give some practical guidelines.  I personally feel that you should have enough trading capital to purchase between 500 to 1000 shares of any given stock without having to use margin.  When I swing trade I look for gains in percentage points however when I day trade I am looking for dollars to take out of the market that day.  I need a dollar figure because this is my salary for my work it is how I make my living so I want to make a certain amount of dollars when I day trade.  I buy more expensive stocks when I day trade and I normally buy either 500 or 1000 shares depending on the price of the stock.  Ideally my target when I take a day trade position is a $1.00 move on the stock.  If I get the move I will run a trailing stop behind the price to lock in the profit if the stock should fall back on me.  I use the trailing stop because I want to take advantage of any more up movement that the stock might have.  If I were to just sell at the $1.00 target I am only robbing myself of possible further upside in the stock and limiting my potential profit.  Remember when you are trading 1000 shares at a time you only need a small move in the stock for a worthwhile profit. 

Keep Expectations Realistic
If you trade stocks in the $30 to $60 range this could mean that you need a minimum of $30000 to start. 1000 shares of a $30 stock or 500 shares of a $60 stock and so on.  This of course would be 100% of your capital in any one position which is very dangerous.  If you want to trade 2 or 3 positions at a time you would need $60K to $90K to start assuming that you trade the 500 to 1000 share blocks.  Of course you do not need to trade that many shares however keep in mind with lesser shares traded you will need bigger daily moves in the stocks to make a decent living and there are times when stocks just do not swing more than $1.00 in a day on flat days. Just remember if you are starting small keep your expectations realistic. Certainly someone trading with $30000 to $50000 is going to have a much more difficult time generating $1000 per day than someone using $100000 or more.  Know your limitations with respect to your capital.  Keep things in perspective and try not to expect miracles. 
When you get into the bigger leagues of day trading you can then take on (purchase or short) a block or two of a stock generally defined as 10000 shares.  You can trade 10K shares of a $5.00 stock for only a 10 cent move and you will have profited $1000 in that trade.  This type of trading would require more capital because I for one would not risk all of my capital on a cheap $5.00 stock.  This is going to require $300000 or more of trading capital plus some use of margin in limited situations and for a limited time. When you reach this level it is easy to see how day trading can become quite profitable and quite risky. A move of a few pennies across 10000 shares can return quite a bit of money quite rapidly if you scalp 3 or 4 swings a day. Just remember it goes both ways; you can quickly lose quite a bit as well. There is no right or wrong answer with regard to how much you need to start. Simply keep your objectives in perspective and be realistic based on the capital in play.

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