Day trading is a popular method that people use to make money online. While day trading has always been used, it It gained a lot of popularity during Covid-19 A pandemic when the prices of most financial assets such as stocks and cryptocurrencies jumped.
These amazing profit opportunities have prompted many people, even those without experience or much capital to invest, to approach the system. It is now estimated that millions of people trade stocks daily in the United States every day.
Although some initial investment is usually required to generate attractive profits, it is also possible to start with a small account and build your success step by step. In this article we will look at how to start trading with $500.
Caution about small accounts
In the past, it was relatively difficult for people To start daily trade For about $500 or less. This changed in 2011 when Robinhood was launched.
Robinhood provides a platform where anyone in the United States can trade stocks without paying a commission. fearing increased competition, most brokers Such as Interactive Brokers, Schwab, and TD Ameritrade as well Switched to commission-free accounts.
These accounts make it possible for one person Trade any amount. Also, the concept of fractional shares means that you can buy any shares in any amount. For example, with $500, you can buy half a share of a company whose shares are trading at $1,000.
but, There are two main caveats to remember.
First, if you are trading with about $500 in the US, Pattern Day Trading Rules (PDT) will enterwhich will limit the number of trades you can execute.
Secondly, day trading with a mini account He has his own risks. In most periods, this means that you can lose your entire account within a short period. This is unlike people with large accounts who can recover their money given enough time.
Steps to start day trading with $500
There are several steps you can follow when you want to start day trading with $500. This is what we recommend.
Educate yourself about trading
the Firstly Important a step To follow when you want to start day trading is education. This is a very crucial stage that most people tend to avoid.
Instead, in most cases, they find a trading advertisement, create a demo account, make a little profit, and then switch to a real account. This is a mistake.
We recommend you Spend a few months educating yourself about trading. In this, you can use freely available resources such as YouTube videos (We recommend TraderTv) and web content To get to know the market. You can also enroll in a paid online course and learn more about how the market works.
There are many important lessons you need to learn, including:
- Fundamental and technical analysis
- How do stocks and other assets work?
- Risk Management
- Trade the news
- Types of orders in the market
- Financial management
You should also do hands-on trading with a demo account when learning. The demo account is a free account It gives you access to the live market. You can use it to create your own trading strategy and test how it works before moving to a real account.
Remember to be realistic with your demo account. In this, you have to make sure that the account has a virtual balance of $500. A common mistake is creating a demo account with thousands or millions of virtual dollars.
Set realistic expectations
A common mistake among many beginners is having wrong expectations. The common issue is where they think they can Double their money in a few weeks.
However, this is not always the case. And strive for a $500 double It exposes you to great risks Where you can lose a similar amount.
Therefore, if you have $500, we recommend that you do so Focus on growing these funds gradually over time. This means setting a goal of making just a few dollars each day. For example, if you are making $10 a day, that equates to $50 a week and $200 a month, which is about a 50% return.
Use a demo account well
As mentioned, a demo account is an important tool that most brokers provide. It is an account that allows you to trade virtual money Without putting your money at risk. Demo accounts are mostly used by novice traders. experienced merchants Use them to test their new strategies.
The correct way to use the demo account is to set it in a way reflects the current situation. In this case, create one with a virtual $500 and set the same leverage you intend to use. Also, use the same strategy that you intend to use on the real account.
Related “ How to switch from paper trading to live trading
Track every step
We recommend you Keep a daily trading journal, a document that tracks your every move. The journal can be a file Electronic or hard copy A document where you list all your trades.
It can have the origin, the execution price, the reason for its execution, and the outcome. You can use paper or other electronic transcription tools such as Evernote and OneNote to write down your trades.
Doing so will help you keep track of your trading process and avoid repeating the same mistakes.
Key risk management strategies
Risk management is essential For all types of traders and investors. It is, in particular, important for people who trade with small accounts.
Some common examples of risk management strategies are:
- small leverage
- Don’t over-trade
- Get stop loss and take profit
- Do not leave open positions overnight
- Learn more about links.
Stop Loss will stop your trade when you reach a certain loss limit while Take Profit stops it when you make a certain profit. Leaving your positions open overnight exposes you to significant risk risk of a large gap when the market opens.
Start with small deals
As part of your risk management, we recommend that you start with small trades. With $500, make sure your trades only make a few dollars each.
As we wrote above, a strategy that will make you $10 a day will do just fine. Doing the opposite will expose you to significant risk as it will increase the potential loss you can incur.
Related “ What is the position size?
Adopt easy winning strategies
Finally, we recommend you Adopt some easy-to-earn trading strategies. A good example of such a strategy is trend tracking, where you decide to buy an asset that is already rising or actually falling.
You can also embrace speculation, executing several trades and exiting when they become profitable.
Consider trading a DTTW item
As an additional option, you should consider proprietary trading, which is one of the most popular methods of making money. Prop trading is where you sign up with a company and then start trading with their money (and software). DTTW™ is one of the best companies out there and bigger players in the industry.
The company allows anyone to start a trading floor that manages thousands of dollars. These people are simply required to deposit $500 for the trading software known as PPRo8™.
Then they can access the TMS solution, which is a demo account that gives them access to several global markets. If you are successful in the demo account, you will have access to more funds that you can use for trading.
In this article, we have looked at the best way to start day trading when you have limited capital. As you have seen, it is a relatively simple process, which can be summed up as education and strategy creation.
We have also explained how prop trading can simplify the way you trade without committing too much of your money.
Useful external sources
- Can I successfully start day trading with a minimum of $500? – Quora