The amount of money you need to make on a monthly basis to be a happy and successful day trader differs for every investor.
What doesn't matter is whether you have $1 million, $100,000, or even a measly $2,000 to invest, you should always start with the smallest denomination possible in startup capital.
And here's the toughest decision every new investor will face during start-up: do you want to be an active trader or a passive investor? The question most often asked by new investors is how much money someone needs to become an active trader.
Well, if you're going for passive income in which you only trade two or three hours a week, anywhere from $150,000 to $200,000 will be needed to qualify yourself as a full-time investor.
On the other hand, if your goal is to be a day trader, then you can get started with as little as $2,000 to constitute a full-time trading business.
But let's be realistic: we're not going to clean out our savings and 401(k) accounts and jump right in.
As a passive income trader, the real number you'll need to get started is about $3,000, and that may even be overly generous in terms of dollar amount commitment.
Even though you're going to want to put that $3,000 into your trading account, you'll probably only trade around $200 to $300 of your principle and that's only after a period of successful simulated trading.
Depending on what trading methodology you're going to use, this simulated trading period should last anywhere from a few weeks to two or three months.
To get started as a day trader with only $2,000 should be relatively painless because it's just not a lot of money.
That cash is basically just a requirement the broker places on its customer's trading accounts as a margin or insurance that you'll be making trades you can cover.
Once you're in, you could just take the account down to $500 or $600 and start day trading.
So day trading doesn't require a substantial upfront capital commitment, especially when you consider that once you're successful, you could make anywhere from $100 to $300 per day on that $2,000 investment.
An Introduction to Using Leverage These days, brokers offer day traders and investors plenty of leverage, which has its advantages and disadvantages.
If you know what you're doing, leverage is a wonderful thing because it will inflate your earnings.
Of course, if you don't know what you're doing, leverage will quickly destroy the value of your trading account.
That's why you'll want to start by simulating your trades, or in other words, use a fake account to make real trades with nonexistent money, until you've developed successful habits.
No successful investor would ever recommend that you take out a second mortgage, a high interest loan, or borrow cash against your credit cards to get into the trading business.
You should use the capital that you've saved or made readily available, that in theory, wouldn't be missed if you happen to lose it.
If you want to call your rich uncle or aunt and borrow money from them, that's acceptable under most conditions.
If your spouse or significant other is really encouraging you to go into this business, go ahead and get money from them.
But what you don't want to do is get into any kind of debt, because then you're trading with baggage and that can easily influence your trades in an extremely undesirable way.
You may feel added pressure to finance your debt, driving you to make bad and otherwise unwise or risky trades that can quickly lead to self-destruction.
Successful investors do not trade on necessity.
Successful investors put themselves into situations where every trade feels right, things are set up the way they should be, and the trade is profitable.
That's the outlook you want to take when you are getting into the trading business.