Trade stocks can be an exciting career move for some, with the potential to earn a passive income and lay the foundations of long-term wealth. However, there are also risks involved in relying on stock trading as an exclusive source of income – and, of course, quitting your job should not be taken lightly.
In this guide, we explore 6 factors to consider before making any drastic decisions related to quitting your job and trading stocks full-time. Plus, we’ll look at some key strategies to make the most of your career as a day trader and boost your chances of reeling in significant returns.
Day Trading: An Overview
The practice of day trading involves buying and selling stocks, bonds, currencies, or other items in the stock market throughout a single day or very often.
It is an exciting way to make money through short-term investments that can yield high returns. By keeping up with news and likely price fluctuations in the markets, traders look for moments of opportunity to buy low and sell high in order to generate profits over time.
Today’s availability of trading platforms has knocked down several entry barriers to this profession and has given the chance to any retail investor to tap into the world of day trading. Nonetheless, it is important to understand that day trading requires significant knowledge about the stock market as well as risk management strategies in order to be successful.
Factors and Considerations To Make Before Quitting Your Job To Trade Stocks
Trading stocks and other assets in the short term can help you boost your income. But, before practicing day trading as your full-time job and quitting your current career, there are some key factors to consider. Let’s start with the ones below.
Consider Starting Day Trading as a Side Hustle
Day trading is an attractive way to generate extra income on the side – and, it does not require you to quit your job right away! Indeed, day trading has low starting costs, involves relatively short time commitments, and can be done from anywhere with an internet connection.
Start slowly by setting small goals or investing in widely traded stocks and ETFs that have well-defined price histories. This can help you hone your investment strategy and better manage your risks.
Choose the Right Investment Types
Although trading stocks is a great starting point, day trading isn’t limited to stocks. So, you should explore different investment options and asset categories before making a decision.
Some valid alternatives include futures, commodities, forex currencies, and cryptocurrency, each of which presents unique opportunities. Although you should start with an asset you are familiar with or knowledgeable about, make sure you are not limiting yourself by not exploring other alternatives.
For example, opening a margin trading account can generate outsized returns even with limited capital for knowledgeable investors.
Leverage Trustworthy Trading Platforms
If you want to make the most of day trading, it is important that you use a trusted trading platform. Doing thorough research can help ensure you are using a reliable source for day-to-day transactions and that you are not accidentally exposing your personal and financial information to bad actors.
Additionally, it is often wise to look into different platforms before committing to one, compare fees and options, and read reviews from other users who have tried similar services. Some must-have features to look for in a great trading platform include backtesting tools, market data feeds, and analysis capabilities.
Use Stock Trading To Create a Passive Income Stream
Day trading stocks is an excellent way to create multiple streams of income. So, for example, you might choose this as a way to make money after retirement. With proper research and practice, almost anyone can trade in the stock market effectively for long-term profits.
Through strategic buying and selling of stock, you could generate both short-term returns as well as reliable passive income over time – all it requires is dedication and commitment to mastering the strategies behind successful stock trading.
Have a Clear Trading Plan in Place
A clear trading plan is essential for success when day trading. It should include the objectives, strategies, and tools you’ll use, as well as rules such as maximum daily losses or risk management control standards.
This will ensure that your trades are consistent and profitable and help prevent impulsive decisions that could lead to financial losses. Establishing predetermined guidelines also gives you greater discipline when trading which can equate to higher returns with lower risks over time.
Understand What To Expect in Terms of Returns
According to estimations, full-time day traders can make an average of $116,895 a year, which correlates to over $56 per hour. When looking at the most experienced traders, median annual salaries can be as high as $198,000.
But while these figures might be enticing, it is important to understand that a lot of how much you’ll be able to earn will depend on your knowledge, strategy, and skills. So before quitting your jobs, you should have a clear understanding of how this choice will impact your finances.
Work With a Specialized Financial Advisor – and Continue Learning About Trading Stocks!
Thanks to today’s trading platform, almost anyone can start a profitable day trading side hustle. Nonetheless, it is important to keep in mind that having a thorough understanding of the market and techniques can impact your chances of success.
Because of this, you should consider continuing to educate yourself about how the stock market works and seek the advice of a specialized advisor.