How to Become a Day Trader

Day trading is an effective method of investing in financial markets. Unlike traditional investing, day trading involves opening and closing trades within the same day, using a brokerage like Interactive Brokers.

Traders profit from short-term price fluctuations and do not hold trades overnight. Day trading allows for trading in various assets such as currency, stocks, commodities and cryptocurrency. If you have limited funds or are risk-averse, you may choose to start trading with a small amount like $100.

How to Start Day Trading

We’ll show you what to look for in a broker, how to choose a security, how to build your strategy and how to open your first trade.

Step 1: Find a Brokerage

If you want to trade successfully with only $100, your broker needs to meet some requirements from your side.

Charges: It’ll be better if your broker charges you based on spread rather than on commission. Commission-based models usually have a minimum charge. Trading small amounts of a commission-based model will trigger that minimum charge for every trade.

The spread fee is the better alternative, as it charges you based on the amount you trade and as a built-in cost.

Minimum Deposit: Your broker of choice should have a minimum deposit requirement of $100 or less. Otherwise, you can’t deposit just $100.

Leverage and Margin: If you trade with only $100, day trading price ticks are insufficient to give you reasonable earnings. Imagine you invest half of your funds in a trade, and the price moves with 0.2% in your favor:

$50 x 0.002 = $0.1 profit

This is why you need to trade on margin with leverage. For example, if you are in the United States, you can trade with a maximum leverage of 50:1. Alternatively, if you are in the European Union, then your maximum leverage is 30:1.

This is due to domestic regulations. The maximum leverage is different depending on your location. In Australia, for example, the maximum leverage used to be as high as 1,500:1. However, it is now at 30:1 due to new ASIC regulations.

Here are a few of our favorite online brokers for day trading.

Best Stock Brokers for Day Trading

The top day trading platforms offer advanced features and functionality. Many platforms cater to both novice and experienced traders, with options like free stock trading, robust desktop platforms and no Pattern Day Trading (PDT) rule restrictions. These platforms prioritize execution speed, ease of use, pricing and reliability to support successful day trading strategies.

Best Forex Brokers for Day Trading

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Investors should keep in mind that 70% of all CFD accounts lose money.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Step 2: Choose Securities

Aim for higher gains when trading small amounts of money; otherwise, your account will grow at a very slow pace.

You can achieve higher gains on securities with higher volatility. Since the currency market is the biggest in the world, its trading volume causes very high volatility. Because of this, currency pairs are suitable securities to trade with a small amount of money.

But which Forex pairs should you trade? Since your account is very small, you need to keep costs and fees as low as possible. You can keep the costs down by trading well-known forex majors:

• EUR/USD
• GBP/USD
• USD/JPY
• AUD/USD
• NZD/USD
• USD/CAD

The major currency pairs are the ones that cost less in terms of spread. But, at the same time, they are the most volatile forex pairs.

Step 3: Determine Strategy

Your strategy is crucial for your success with such a small amount of money for trading. You need to consider when to trade, the amount you’ll invest in each trade, when you’ll enter a trade, how you will manage your risk and when you’ll exit a trade.

Learn More About Trading

As you determine a trading strategy, you should endeavor to learn as much as possible. Look into research and alert platforms like Eagle Investors. You can register for alerts from active traders or even join a chatroom with other traders. You can register for Eagle Investors here. Eagle Investors even shares statistics related to its recommendations, demonstrating how well the platform works.

If you want to take a course, try Udemy’s Day Trading and Swing Trading Strategies for Stocks. You can register here to gain access to the course, videos and documentation. The course teaches you how to build a trading strategy, interpret market activity and more. You even get a certificate when the course is completed.

When to Trade

A good time to trade is during market session overlaps. For example, the EUR/USD and the GBP/USD are most volatile in the time when the London markets and the U.S. markets are both open.

The U.K. and Europe conduct transactions in GBP and EUR, and the U.S. conducts transactions in USD. The transactions, and supply and demand of these currencies, make their prices fluctuate. Since the GBP, the EUR and the USD fluctuate, the GBP/USD and the EUR/USD forex pairs are very volatile at this time.

Amount per Trade

The best approach is to invest a large amount of your $100 in each trade and have no more than a single trade open. This way, you can hit a single trade in a big way instead of executing multiple small trades at once. For example, you can invest 60% of your bankroll in each trade and, at the same time, have no more than one trade open.

When to Enter the Market

Your trading strategy should suggest the conditions to enter the market. You can use various technical indicators to do this. Some of these indicators are:

• Candle patterns
• Chart patterns
• Oscillators
• Momentum
• Volume
• Volatility

You can use these indicators to determine specific market conditions and to identify trends. Identifying and riding a trend means you can aim for high returns.

Risk Management

When you’re trading in normal conditions with a comfortably high amount of money, you shouldn’t risk more than 2% of your capital per trade.

However, since you have only $100, you can take a higher risk as your losses are limited to what you have in your account. Therefore, a risk of 3% per trade is reasonable for these trading conditions.

Three percent risk per trade means $100 x 0.03 = $3 maximum risk in each deal. You can trade with a maximum leverage of 50:1 in the U.S. This will give you a total buying power of 50 x $100 = $5,000.

If you invest 60% of your bank in each trade, this is $3,000 per trade. Your stop-loss order should be at a percentage distance from your entry price equal to 3/ 3,000 = 0.001 or 0.1%. In other words, if you buy the EUR/USD at 1.1450, your stop-loss order should stay 0.1% below the entry price.

You can calculate it this way:

1.1450 x (1 – 0.001) = 1.1439

1.1439 is the level of your stop-loss order once you take these conditions into consideration.

Conditions to Exit a Trade

The $100 bankroll trading requires a more aggressive approach, so here are some different exit rules.

Use a trailing stop-loss order instead of a regular one. Still stick to the same risk management rules, but with a trailing stop. Catching a trend will put profit aside every time the market ticks in your favor, and if you manage to catch a big spike, then the trailing stop will adjust to the rise in price, hopefully increasing your profit.

In this case, you will only exit the market if the price hits your stop, and you will stay in the market as long as it is trending in your favor in these kind of financial services.

Success Rate and Profit-Loss Ratio

If you manage to get a 3:1 profit-loss ratio with a 30% success rate, and you risk $3 per trade aiming for $9, succeeding in only 30% of the trades will generate around 7% profit per 10 trades using the above rules. Here’s how your account will look after 1,000 trades:

If your account grows by 7% per 10 trades, your $100 bankroll will grow to more than $80,000 after 1,000 trades. But, of course, this is a very straightforward example, and 7% per 10 trades is a big profit, which only a fraction of traders will ever achieve.

The suggested strategy involves only one trade at a time due to the low initial bankroll. You can hardly make more than 10-15 trades a week with this strategy. If you conduct 2 trades per day, you’ll need 500 trading days to reach these results with the above success rate. Since every trading year has about 250 trading days, you will need 2 years of strict trading to achieve these results.

Notice that in the above trading rules, you will need 250 trades (around half a year) to reach $500 and 360 trades (approximately 9 months) to reach $1,000 in your bank.

You can always consider a different strategy where you trade with less risk (1-2%), invest less in a single trade (25%-30%) and open more than one trade.

Step 4: Start Trading

Next, create an account. Navigate to the official website of the broker and choose the account type. Remember, you’re looking for an account that lets you trade with only $100 on margin. You’ll need to submit personal details like an email, address and phone number. You will also receive a confirmation email.

You’ll need to send confirmation of your identity, which is a standard procedure, and you may also need to provide some income information, though this is unlikely to happen if you want to fund your account with only $100.

After you confirm your account, you will need to fund it to trade. Use a preferred payment method to do so. Download the trading platform of your broker and log in. Make sure you adjust the leverage to the desired level.

Navigate to the market watch and find the forex pair you want to trade. This could be the EUR/USD or the GBP/USD. Open the trading box related to the forex pair and choose the trading amount. Make sure you set up a stop-loss order or a trailing stop-loss to control risk.

Can You Day Trade With $100?

The short answer is yes. The long answer is that it depends on the strategy you plan to utilize and the broker you want to use.

Technically, you can trade with a start capital of only $100 if your broker allows. However, it will never be successful if your strategy is not carefully calculated. For this reason, you should support the idea to trade with only $100 through detailed research, a thorough calculation of your strategic outcomes and strict risk management rules.

Get Started Day Trading

Day trading can be stressful for inexperienced traders. This is why some people decide to try day trading with small amounts first. For example, trading with a bankroll of only $100 is possible but will require some extra amendments to manage risk and gain a healthy profit.

You can always try this trading approach on a demo account to see if you can handle it. A demo account is an excellent way to adapt to a trading platform you plan to use. For example, you can begin trading with a $100 account once you feel comfortable on the demo account.

Looking for more resources to help you begin day trading? Check out our guides to the best day trading software, or the best day trading courses for all levels.

Frequently Asked Questions