Day trading stocks can be a successful way to create income- but it’s not easy. Many people want to make a profit in this bear market, but there are many challenges that day traders face in the COVID-19 era. This TradingSim article will explore how the real benefits and costs of being a day trader. The article will also teach day traders how to trade stocks from home and help them find the best strategies and stock picks to become a successful trader.

How do you get started day trading part-time?

Day trading involves quickly trading securities several times a day. Traders buy and sell stocks often throughout a trading day to make a quick profit. Volatility in the stock market helps day traders make a larger profit. However, stock fluctuations can backfire if a trader trades too hastily or makes a bad trade.

When is the best time to trade?

The best time to day trading is at the start of the day at 9:30 AM EST. The first hour of the trading day can be the most pivotal because there is more liquidity, when there is a higher volume of trading in the first trading hour. and there is the most volatility at the start of the trading day.

The other ideal time to day trade stocks is at the end of the trading day from 3 PM-4PM EST. Just as at the beginning of the trading day, high volatility at the end of the day can help day traders maximize profits.

What is a good day trading strategy?

Before traders get serious about day trading, they have to make some important decisions. Here are some things to consider before they start day trading stock strategy.

1. Determine whether you have the time and patience to day trade. Day trading is not a hobby. It’s a time-consuming job that takes up hours of a trader’s day. Even though day trading moves fast, a lot of methodical thinking is required to day trade stocks. Day traders also need excellent math skills, risk-taking abilities, and discipline to study the changes in the stock market.
2. Study the stock market. Day traders need to diligently study the stock market to be a successful trader. Traders have to possess a wide range of financial knowledge to withstand the ups and downs of the Dow Jones and NASDAQ. It can take years to master the stock market, so studying the nuances of the market is essential.
3. Study the different securities to trade. Day traders not only trade stocks. Traders have to research ETFs, foreign currency, or other assets to trade if they want to branch out beyond stocks. Novice traders may not realize that there are different rules and strategies for various assets.
4. Practice trading with simulated trading. Before traders risk their own capital, they should test their trading strategies. TradingSim would be a perfect outlet for traders to try out simulated trades before they decide to risk real money in the markets.
5. Start small, then expand. Once a trader has the capital, they should still slowly delve into trading stocks. Day traders should start small to minimize risk. If a day trader suffers losses, it won’t be as devastating if there is less money on the line. When a trader experiences success after three months, they can incrementally put more money into the markets. If they are still struggling after 90 days, they should maintain or even decrease the amount they have invested.

How much money do day traders need to start?

While there is no set amount to start day trading stocks, there is an amount that should be sufficient to weather the unpredictability of the stock market. When a day trader is ready to invest, they must have a lot of money saved to quickly buy and sell shares.

A trader should have at least $10,000 in disposable income ready to invest in the stock market. The Securities Exchange Commission notes that ideally, a day trader should have at least $25,000 in their day trading accounts. If a potential trader can’t afford to risk that much capital to withstand market volatility, they aren’t ready to day trade stocks.

A beginning day trader’s account also depends on what asset is being sold. To buy stocks, a trader needs at least $25,000. However, for day trading futures, $10,000 is recommended. For trading forex, $100 is likely the lowest amount needed. No matter what asset day traders buy and sell, all traders shouldn’t risk more than 1% of their trading income on one trade. For instance, if a day trader has $25,000 in their account, they should risk more than $2,500 on a single trade.

What equipment does a day trader need to work from home?

In order to treat day trading stocks like a work-from-home business, a day trader needs the right equipment. Traders should invest in a trading machine and trading software. Day traders should also have two monitors to watch charts and data.

The most important day trading equipment may be a steady internet connection. With a reliable wi-fi connection, traders have less risk of missing important trades if there’s an internet crash. A backup internet connection is also recommended for traders who are day trading at home.

Why is there a resurgence in day trading stocks?

Once investors start day trading stocks, they can join a plethora of new investors. There has been a recent revival in day trading for two key reasons. The recent volatility in the stock market has led many people to try to make money by day trading stocks.

Goldman Sachs analysts noted that the new influx of traders is driving movement in the options market.

“Investors are increasingly asking us about the participation of individual investors in the shares and options market. Our data suggests that individual investors are indeed a significant proportion of daily volume, ” noted Goldman Sachs analysts.

Sports betting drought leads to day trading increase

Another reason for the resurgence in day trading stocks is strangely enough because of sports. COVID-19 shut down sports events, so there were fans missing games to watch- and bet on as well. Instead of betting on the performance of LeBron James, gamblers are now betting on the performance of Tesla (NASDAQ:TSLA) stock.

In addition to trading on their own, sports gamblers are also following the stock picks from the head of a sports website. Barstool Sports’ Dave Portnoy has picked winning stocks during this bear market. He compares day trading in the current market to the unpredictability of a sports event.

“With the volatility, it is kind of like watching a sports game,”  said Portnoy.

Jim Bianco is president and macro strategist at Bianco Research and monitors day trading trends. He noted that young gamblers are moving to day trading with the latest sports hiatus.

“Sports gambling is a huge business in this country and a lot of sports gamblers and a lot of these millennial gamers are now playing the stock market, day trading,” said Bianco.

What are the benefits of day trading?

After Buffett dropped his airline holdings, Portnoy bought stock in the troubled industry. When the airline stocks rebounded, he felt vindicated as a budding financial expert.

“I’m a little surprised that it’s become pretty well known within the financial community. That’s kind of our target audience regardless of what we’re covering and I think Barstool was popular in those circles to begin with,” said Portnoy.

Portnoy’s contrarian investing is a day trading strategy that can work if a day trader is diligent and studies the markets well. If a day trader is savvy with their trades, they may profit from going against the popular opinion of Wall Street experts.

Zero-commission apps lead to more day trading

The rise of Robinhood and other zero-commission trading apps are helping drive the rise of day trading. Andrew Laphorne is a stock analyst at Societe Generale. He said that new day traders bought cheap stocks as the economy cratered and profited as the market is slowly rebounding now.

“For all the mocking of Robinhood investors, their timing back into the market looks impeccable, with a significant pick-up in holdings as equity markets bottomed in mid-March,” noted Laphorne.

Airlines rebound with new day traders

Despite Warren Buffett selling airline stocks, young day traders are lifting the industry back up. An airline ETF, JETS, saw its value rise a whopping 2,000%. Millennial day traders purchasing the ETF led to its rebound.

Frank Holmes, chief executive officer of JETS issuer U.S. Global Investors, loves the recovery. He believes that young day traders buying the dip helped JETS’ value grow to $1 billion.

“All these millennials, being stuck at home with no bars to go to and no beaches to travel to, took their money and became day traders. They’re bored, they want to make money,” said Holmes.

Financial advisors cheer new growth in day trading stocks

Many financial advisors welcome the new breed of day traders. Nate Geraci is president of the investment advisory firm, the ETF Store. He sees Portnoy as a social media savvy version of investing giant Warren Buffett. Geraci also credits Portnoy for making day trading entertaining to his millennial followers.

“It’s really been a perfect storm. Investors are seeing firsthand the thrill of victory, the agony of defeat, and he’s doing it with large sums of money, so I think for younger investors, that’s really enticing,” said Geraci.

Day trading may be best for people who want to make quick profits from short sales. For short-term investors, day trading can be a quick way to earn money. Josh Brown is the chief executive of Ritholz Wealth Management and says day traders are just having fun day trading stocks.

“They’re not expecting to retire off of trading stocks. They’re having fun and they’re learning the market, and I think it’s great,” said Brown.

Day trading can also best for self-starters who want to work independently. Day trading stocks may be best for traders who learn best by learning on their own.

What are the risks of day trading?

While there are some benefits to day trading stocks, there are many risks associated with day trading.

Despite his recent success with day trading, Portnoy cautions that his Twitter followers shouldn’t heed all his financial advice.

“I’m not a financial advisor. Don’t trust anything I say about stocks,” said Portnoy.

While Portnoy’s day trading venture is currently paying off, it’s risky to follow advice from people who aren’t financial experts. In addition to not listening to experts, day traders shouldn’t just follow their emotions. Making rash trades based on emotion leads to more losses. Traders who buy and sell stocks without stop-loss limits can risk losing more capital than they can afford.

Day traders can lose a lot of money if they don’t limit their number of trades. Trading too much can lead to a lot of fees for traders. Setting stop-loss orders can help minimize risk. Many traders also buy stocks on margin and borrow too much money to trade stocks. Day traders should stick to a set limit on how much to trade and not depend too much on margin and leverage.

Financial experts warn about day trading inexperience

Day trading novices may feel a rush from their new venture, but there are risks. Caleb Silver, Investopedia’s editor-in-chief, believes that day trading beginners should be cautious with the large volatility in the stock market.

“People are new to trading and new to investing and want to take advantage of these wild swings,” said Silver.

“These are the most dangerous times to start day trading … This is when people really get hurt,” added Silver.

Silver noted that day traders must know their limits when trading so they don’t lose too much money.

“This is a super volatile time. You could lose your shirt in a day. You could gain two shirts back the next day, but you have to know what your limits are,” said Silver.

Mark Cuban cautions about day trading boom

Shark Tank star and Dallas Mavericks owner Mark Cuban is wary about the day trading boom. He thinks that zero-commission costs enable day traders to take more unnecessary risks.

“We have day traders who are able to go into margin with next to 0% interest. They’ve got nothing else to do. Their transaction costs are zero,” said Cuban.

Cuban also believes that once the economy slows again, there will be huge sell-off among day traders.

“You can also make the argument that this whole run-up is just buying the rumor. Once we start to really have definitive data on the other side, people are going to sell on the news, and if I had to make a bet, that’s it,” said Cuban.

Cuban also noted that the resurgence in the stock market will depend on how many workers are rehired.

“A key question is how many workers will be rehired and how consumer spending will fare once enhanced unemployment benefits end on July 31,” noted Cuban.

Cuban doesn’t think that day traders are fully prepared for another economic slowdown.

“We don’t know if all the jobs are going to be there, and we don’t know what happens with demand. I don’t think the market is truly understanding the challenges that we may be facing,” added Cuban.

Day trading rarely leads to profits

In addition to the risk of losing money, there is the risk of not earning much money at all. While many day traders tout the quick money that can be made, those profits rarely come through. A Brazilian study found that only 0.1% of day traders earned more than the nation’s minimum wage after almost a year of day trading stocks. The study noted the poor success rate of independent day traders.

“97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading,” noted the study.

Day traders should expect to lose a lot of money before they see any profits. Even if traders earn any income, they can lose portions of their wins through high taxes. Short-term gains are taxed at a higher rate than long-term capital gains.

What advice do day traders give?

Day traders can get advice from more experienced traders. Jason Bond is an experienced trader that touts his experience as a trader.

“Having trained multiple clients who’ve gone from cubicles with small trading accounts between $10,000 to $37,000 to successful, full-time day traders, making millions in just a few years, I have verified proof people can make the leap from their career to trading full time,” said Bond.

Bond also suggests that beginning day traders should get mentors to help them navigate the ups and downs of the markets.

“The best way to become a day trader is to learn from existing profitable day traders. There’s an overwhelming amount of theoretical material on the internet about how to day trade, but nothing beats learning from someone who is currently successful at it,” said Bond.

Day trading expert Brandon Wendell also says that not holding stocks for too long can lower risk.

“One of the best ways to control risk is limiting the length of the trade. The longer you are in a position, the greater the likelihood is that price could move against you. By day trading, you eliminate overnight and weekend risk, especially when you trade markets that close, like stocks,” said Wendell.

Discipline is key to day trading stocks

While Bond had success as a trader, many other day traders note that success doesn’t come easily. Deeyana Angelo is a managing director of Market Stalkers. She stresses that being a day trader requires a lot of training and discipline.

“Becoming a day trader is something that a lot of people see as an easy way to make money where you don’t need much experience – just click a few buttons and hey presto, you’re rich! But nothing is further from the truth,” said Angelo.

Brandon Wendell, an investment expert, noted that limiting risk and not holding stocks for too long is key to success as a day trader.

“Day trading is a very difficult performance discipline, much like becoming a professional football player or playing a musical instrument to a virtuoso level. You first need to have a natural talent, followed by years of practice,” added Angelo.

Merlin Rothfeld is an investment strategist that studies day trading. Rothfeld advises investors who are day trading stocks to be patient because they will monitoring screens all day. Rothfeld also doesn’t want traders to stray from a well-thought-out trading strategy out of fear or haste.

“Quite often, day traders will take trades because they are just sitting in front of their screen all day. A forced trade is generally going to be a losing trade. Always follow your rules,” said Rothfeld.

How much do day traders make?

A day trader’s salary can vary greatly. If a trader is working independently, they face an uphill climb to a steady salary. Freelance day trading is similar to a sales position. There are times when income is high, especially if trades are executed well. A day trader may also make very little money if the stock market tumbles or a trading strategy backfires.

An independent day trader’s salary will also depend on how much capital they have invested in the stock market. As noted in a previous TradingSim article about a day trader’s salary, an average day trader’s salary has a 20% annual return. If a trader has $100,000 in an account, they may have profits of $20,000 in the best-case scenario.

Day trading for a firm has a more stable salary. According to ZipRecruiter, the average salary of a day trader is $80,000. However, that depends on experience and the city a trader is located in as well.

If a day trader has years of experience and lives in a small town, that’s a substantial amount of money. However, if a day trader has substantial debt from buying stocks on margin, lives in a major city, and has other major expenses, that amount may not go as far as originally thought.

How does day trading at home compare to working from a firm?

There are many differences between day trading stocks at home and at a proprietary trading firm. When a day trader is working from home, they have more flexibility. Day trading stocks requires a lot of studying and commitment. Traders can focus on the stock market in their home offices and their trades without distractions in a noisy firm. Day traders can also keep more of their profits than a trader in a firm.

However, there are downsides as well. Many distractions from friends, family, and IT emergencies can derail a trading day. Day trading at home means that they have to shoulder economic burdens on their own.

For day traders in private trading firms, there are some advantages. Day traders in an office can have more help on a trading floor from more experienced traders. Day trading with a firm’s funds lessens a financial burden of day traders.

There disadvantages of being a day trader in a proprietary firm as well. Day traders in proprietary firms are just paid as contractors and not salaried employees. They also keep less of their profits than an independent trader. Day traders in firms often have to pay for training fees or give their employers a cut of their profits.

How does day trading at home compare to other work-from-home jobs?

Day trading can be much more challenging than other work-from-home jobs. There is a range of jobs that pay less and some that pay more than day trading at home.

Working from home is a growing option. A study from Upwork and the Freelancers Union found that over 50% of workers were working from home just three years ago. After the COVID-19 pandemic, that number is sure to increase.

If a trader from home can make $40,000 a year on average, there are jobs that pay less. Virtual assistants that perform administrative duties can make on average $26,000 a year. Freelance writers can earn a range from $10,000 to $30,000 a year.

Those careers pay less than an average day trader’s salary. There are some work-from-home jobs that pay more like in the customer service industry.

Brie Reynolds is a career development expert at work-from job site FlexJobs. She notes that customer service is an in-demand job that can pay more steadily than day trading stocks at home.

“Customer Service is the No. 1 field for remote jobs right now. This is a field without a lot of barriers to entry in terms of experience or education levels. Unemployed retail workers who enjoy helping people may be able to use their skills in communication, problem- solving and sales to transition to a remote customer service job,” said Reynolds.

Customer service jobs may pay as much as $60,000 a year. Data and IT work-from home jobs are the most lucrative. Data analysts can make $50,000 a year. A website support specialist can earn $100,000 a year.

Some jobs pay less and some are more lucrative than day trading from home. Day trading is on average at the low end of the spectrum with earnings of $20,000-$30,000 a year

How do day traders find the best stocks?

As noted in a previous TradingSim article about finding the best stocks to day trade, there are methods to pick top stocks. Day traders should look for stocks that have high volume to move quickly in and out of their positions. They can monitor them on financial websites like Yahoo Finance. TradingSim charts enable day traders to simulate trading and test out their strategies before investing in stocks.

Below are five stocks that would be best for day traders that are day trading at home.

1. Apple

As a TradingSim article noted, Apple(NASDAQ:AAPL) is a perfect stock for day traders. Apple is moving 22 million shares are bought and sold daily. The tech giant’s high volume makes the stock attractive to day traders.

Financial experts rate Apple as a buy

Many financial experts think that Apple is a buy in this bull market. Todd Gordon is managing director at Ascent Wealth Partners and monitors Apple stock. He believes that Apple stock can rise 40% over the next few weeks.

“If you look at the three advances since 2013, each has been at least 130% followed by a one-third giveback. The current advance is only 66%, so we can easily — if history is to repeat — see another 70% in years to come, putting us at $490 potentially,” said Gordon.

Steve Chiavarone, portfolio manager at Federated Hermes, also believes that a strong balance sheet and consumer demand will drive high volumes of Apple stock.

“Growth has been the new defensive. Strong cash flows have met strong balance sheets which means you haven’t been under pressure because you needed external financing, and your return on capital is safe,” said Chiavarone.

He also believes Apple “consumers have pent-up demand. They have stockpiled savings, and we expect the consumer to have a good second half.”

Charts show Apple stock a top pick for day traders

Blue Line Capital President Bill Baruch noted that charts show that Apple avoided a death cross. A death cross is when the 50-day moving average moves below the 200-day moving average. Apple has avoided that drop, which makes it a top pick for day trading, according to Baruch.

“It broke out above last year’s high, a big resistance level at $327. Now, that is support, and overall you also have a rising trend line from the lows in March, and for me $327 to $330 is going to be a huge support level,” said Baruch.

“I also want to point out that it did not get the death cross, and the fact that the 50-day moving average rejected crossing below the 200-day moving average in May — it fueled the upside as it has done in many of the tech stocks,” added Baruch.

Apple’s high volume of stock movement and bullish analysis from financial experts make the stock a top pick for day traders.

2. Facebook

As noted in a TradingSim e-book, Facebook(NASDAQ:FB) is a favorite stock for day traders. Facebook has 25 million shares moving daily. The liquidity makes Facebook an ideal stock for day traders to quickly exit positions. Facebook CEO Mark Zuckerberg noted that the company’s success depends on its Marketplace division and dependence on small businesses.

“Overall, though, our business depends on the success of small businesses. So, this is a moment where we feel that we’re well-positioned to be champions for small businesses interests and supporters of important infrastructure that they’re going to need in order to move online,” said Zuckerberg.

Financial experts bullish on Facebook stock

Financial expert Jim Woods says Facebook’s stock is outpacing other tech stocks.

“That stock is outpacing 97% of all other publicly traded companies in terms of relative price strength,” said Woods.

Citi’s Jason Bezinet predicts a $7 billion growth for the company because of its upcoming Shops e-commerce division. “

“The firm should benefit from: a) the continued growth in e-commerce and b) the growing propensity of consumers to shop within social media apps,” said Bezinet.

3. Tesla

Tesla(NASDAQ:TSLA) would be a great stock for day traders that want a stock with high volume and volatility. The corporation’s stock is trading at 16 million shares a day. The electric car company’s stock soared to $1,000 a share after a better-than-average rate of car deliveries.

Jefferies upgraded its price target of Tesla up to $1,200 after Tesla’s stock climbed. Analyst Phillipe Houchois wrote in a note to clients that coronavirus will drive consumers to want more electric automobiles like Tesla.

“We see COVID-19 as an accelerator of the transition to EVs and renewables, from consumers and public policy,” said Houchois.  

Horchois also noted that Tesla is more advanced than its automobile competitors with its technology.

“Tesla remains significantly ahead of peers in product range, capacity and technology. Near term, EV-friendly incentives in the European Union and lower-priced Model 3 support second-half volume, making Tesla more resilient than peers,” wrote Horchois.

“Against expectations even a few months back, the gap with peers is widening, from product to battery tech/capacity,” added Horchois.

Some analysts bearish on Tesla stock

While Jefferies upgraded Tesla to a buy, Goldman Sachs downgraded its rating of Tesla down to neutral because of its high valuation.

“We’d look to become more positive on Tesla stock again if we had more confidence in the near to intermediate-term trajectory of fundamentals, or if valuation became more attractive. We maintain our view that the electric vehicle market offers attractive long-term growth, and we think Tesla will be able to sustain a leading position in EVs[electric vehicles] (and with solid margins),” noted Goldman Sachs.

Morgan Stanley also downgraded its rating because of something that may be a benefit to day traders- Tesla’s high volatility.

“While Tesla has long been an expensive stock, and we recognize that valuation has expanded for the entire market, we believe that there is a higher bar for Tesla’s fundamentals than other stocks that may have challenging near-term results given Tesla’s premium absolute multiple along with the historical volatility of Tesla shares,” said Morgan Stanley.

While establishment banks may disapprove of Tesla’s volatility, the high volatility and volume make the stock a good choice for day traders.

4. Microsoft

Microsoft (NASDAQ:MSFT) is another large-cap, high-volume stock that may be good for day traders. The corporation’s stock rose after a positive Q1 2020 earnings report. Jefferies analyst Brent Thill rated Microsoft stock a solid buy. The work-from-home boom during the recent quarantine boosted its Microsoft Teams service.

“The biggest beneficiary of the new work from home environment is in the productivity suite and especially Microsoft Teams, which has seen a large spike in demand,” wrote Thill in a note to clients.

5. Roku

Roku (NASDAQ:ROKU) is a streaming disruptor that has soaring stock and volume. The company has 19 million shares moving each day. Roku will partner with Kroger to use data to attract more customers. The move led Rosenblatt analyst Mark Zgutowicz to rate Roku stock a buy.

“Roku shopper data program, launched with one of the largest global grocery retailers, shows significant potential to alleviate friction between linear and CTV ad buys,” said Zgutowitz.

Roku’s stock rose 6% this year as more customers stayed home and canceled their cable subscriptions.

The high volume of Roku stock makes it a good buy for day traders.

Laura Martin is also bullish on Roku stock as more American viewers move from cable to streaming TV services.

“Roku had 45% (40 million of 88 million) of total connected TV homes in the US at 3/31/20, and therefore we believe Roku will be the winning aggregator of streaming TV and film content apps,” said Martin.

Analysis and patience key to day trading from home

To make money quickly from day trading at home, ironically, a lot of waiting is required. Building an effective trading strategy and studying the stock market is key. Working from home as a day trader can be a nice side hustle for beginners, but not a lucrative career to retire from in 30 years.

Despite what some traders on zero-commission apps may say, day trading is not a harmless get-rich-quick scheme. The stock market is cyclical and what goes up always eventually comes down. With TradingSim’s blogs, charts, and insights, day traders can learn more about how to withstand the unpredictability in the stock market to make money in the stock market.