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Day Trading: Getting Started
To start trading, you have to invest some money in stocks. This is the
first ground-breaking step to becoming a day trader. But it’s not as
simple as simply opening an account somewhere, spending a couple of
bucks, and hoping for the best. Day trading is a hobby for some - those
who can afford it. For others, it’s a profession. Whether you’re
planning on making your living from trading or you just want to make a
bit of extra cash, your best strategy is to behave and think like a
professional day trader.
At this point, we’re going to make an assumption. The assumption is
that you aren’t planning on getting a job on the floor of a stock
exchange, running orders back and forth. You’re probably looking to
trade for yourself, at least to begin with, although you may look to
trade for other people (become a broker) when you have a bit more
experience.
Whatever your long-term plans are that involve day trading, you’re
going to need some basic equipment to get started.
Necessary Equipment for Day Trading
A Good Computer: Be clear on what constitutes a good computer for
trading. If you have a computer already and you can meet the other
requirements outlined here, you’re probably okay to start out. That
said: if you decide to keep going with your trades, at some point you
will need to upgrade.
The guidelines your computer should meet:
• 1000MHZ with 52MB of Ram
• 100 Gigabyte hard drive
• High Quality Video Card
• Monitor of at least 17”
All of this usually sets you back somewhat , but the speed and
efficiency will make it worth the money.
High Speed Internet Connection: In many respects, this is the most
fundamental requirement to conduct trading. It’s absolutely paramount
for day traders to get information fast across the internet. Look back
to the explanation of what a day trader does. They hold on to stock,
usually between a couple of seconds to a couple of minutes; a couple of
hours tops. You need to get fast order executions, confirmations of
trades and delivery of news, quotes, and other market data. For this, a
56K modem dial-up connection is barely adequate. You really need either
a cable model or a DSL phone line. As you can generally get
good plans for phone, internet, and cable, you don’t end up paying too
much nowadays: about $15-$20/month for dial-up, $30-$50/month for
either cable or DSL are well worth the investment.
Access to Real Time Data: There are numerous firms who can supply you
with real-time online market data. You need a subscription to a real
time service to get real-time information on the following:
• Stock quotes and ticker
• Market averages and indices
• Market news stories
• NASDAQ Level II screens
• Charting
• Price and news alerts
Real-time data subscriptions vary widely depending on the supplier and
the quantity or type of data you want. Expect to pay about $75 to $300
(or more) a month for a good data feed service.
Online Order Executions: Finally, you’re going to need some way to
process purchasing and sales orders online. The process you need is an
online order execution system of which, for day traders, there are two
basic types. The first type of service is offered by online discount
brokers such as E*trade or Waterhouse Securities. An online brokerage
is by far the most commonly used online trading service. The second
type of service is known as Electronic Direct
Access Trading, or EDAT for short. This will connect the customer
directly to the appropriate exchange, usually through a modem or
dedicated phone line.
The only thing to be aware of when choosing between a traditional
online brokerage and an EDAT is that online brokerages may operate too
slowly to accommodate active day trading. An EDAT system allows you to
place an order directly into the market resulting in much quicker order
executions and confirmations than regular internet broker.
Business at High Speed: Real Time Data
The reason you need both a fast computer and a fast internet connection
to be a day trader: you need access to real time data. What was a good
day trade five minutes ago may not be a good trade now; what was a good
trade five seconds ago may not be a good trade now.
Slow computers and slow internet connections create costly problems for
day traders. You need access to real-time market data to make your
trades.
Your monthly overheads are generally between about $400 and $500
realistically; that’s if you really want to make some money with your
trading. Of course, you can start out slow and work your way up to
better services to manage the cost. You’ll get to decide whether paying
more for a service turns out to be worthwhile. If you have a knack for
trading, it probably will.
Now you have the basic tools in place, it’s time to discuss setting up
a portfolio and actually going about trading stock.
Note:
After you sign up for this package, you
will need to confirm your request to receive your free day trading
checklist report. This is done by clicking on a
confirmation link in an email that will be sent to the address you
enter above. The subject of this email will be: "Confirm Your Request For
Information"
If
you do not
confirm your request, you will not get your free report
The information
in this guide and on this
site should not be construed as financial advice and are for
information purposes only. The authors and publishers are not financial
advisers. You should rely on your advisers and lawyers for financial
advice.
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