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Day trading contracts for difference (CFDs), stocks or indices, has become popular in recent times. The popularity of day trading has been largely due to numerous advertisements for money making systems, seminars and educational courses that guarantee overnight success. Many of these courses also profess to be low risk and require only a small capital outlay. The truth is, trading is hard work, the more time you devote developing a successful trading plan the more likely it is that you will succeed, however you should be aware that success will not come overnight or without losses.

Once you have put in the time and effort to formulate a trading strategy only then should you consider becoming a professional day trader. Day trading offers many lifestyle benefits including the ability to be your own boss, you no longer need to go into work and take orders from your boss. However, you should not take this freedom for granted, trading should be treated as a business and you must be discipline in order to succeed. If you do not apply discipline to your trading you should not consider trading as a career.

There are significant lifestyle benefits that come with day trading, being you own boss allows you to chose your working hours and even your office, you can work from home or whilst on holidays. Getting into day trading requires little capital outlay as all a Day trader needs is a trading account, computer and internet access. Before you run out and buy yourself a new computer remember that you should also have sufficient funds in your trading account, a common mistake day traders make is that they are undercapitalized when they first start. You should start with at least $20,000 - $30,000 this will allow you to develop and refine your trading strategy and allow you to recover from mistakes. 

The time you spend analyzing and watching the markets will depend the trading strategy that you adopt. Day trading and scalping requires constant monitoring of the market as day traders look to profit from small price movements, whilst swing trading requires that trades be held open for 2-3 days, meaning that you do not need to spend as much time in front of the computer.

Although trading professionally from home allows you to choose your own working hours, it is very important to be aware of key times during the day, in the stock market these are the opening and closing phases of the market, in Australia this is 10am and 4pm. You should also be aware of major overseas market movements and how they affect the local market that you are trading and specific announcements relating to the company’s that you are trading.

Do not believe the promises of guaranteed returns develop and back test your own trading strategies that suit your lifestyle and the time you have to spend on your trading. Trade your strategy and refine it as required, remember you will make mistakes but don’t be disillusioned this is common, simply understand where you went wrong and refine your strategy. Once you have developed a strategy that works for you and suits your lifestyle you will be rewarded with the advantages that being a day trader has.

There are a number of CFD providers that can assist you in getting started, but be sure to choose a CFD provider that is able to offer you a reliable trading platform.

To learn more about trading CFDs from home for a living you should read our free CFD Guide.

The first thing to remember is that trading is not a level playing field. Professional traders have a lot of advantages over the private trader. Despite the accessibility and availability of CFDs to retail investors nowadays, in general, the pros still win more often than the non-pro traders. Why?

The pros have:
Better access and information flow – fund managers and institutional players spend significant amount of money to access market information. Most of these institutions are backed by large teams of researchers and analysts who constantly monitor the market. Professionals will almost certainly have a lot more information at their fingertips (or at the end of a telephone) than private traders. They will know a lot of people in the market and can formulate views by speaking to others.

Work as part of a team – institutional players usually have researchers, analysts and other market specialists that work as a team to maximise profitability. The typical private trader is just that – a single person. There is nothing wrong with that of course, but a private trader has to do everything from making the tea to executing the trades. Often working in a team can help professional traders – much of the work can be delegated.

Huge amounts of capital – This is of course the single biggest advantage that a professional has. Often the money is not their own and that can make trading easier on occasions. Due to the nature of their business, fund managers and other institutional traders have easy access to millions of dollars of external capital not available to retail traders.

While institutional traders and fund managers have inherent advantages over retail traders, there are ways to level the playing field. If you are to treat CFD trading as a business (as you should), you must ensure that:

You have enough capital – There’s a well-known saying among traders that goes: “Don’t trade with money you cannot afford to lose.” Sometimes this is called ‘scared money’. If you are to trade (CFDs or any other instrument), make sure that you have enough capital and that you are not trading with money you are not prepared to lose.

You get real time charts and other tools – Access to information is vital in trading. You have to know what is happening in the market particularly if there’s a lot of volatility that may provide profitable trading opportunities. You have to know the exact price movements to be able to trade the trend. End-of-day data download will be useless if you’re trying to catch intra-day price movements.

You have the fastest Internet access you can afford – Broadband access has never been more affordable, so take advantage of this technology to enhance your trading.

You pay lower/lowest commission – Commission is a business expense and must be kept to the minimum. Even large institutional traders seek ways to pay the lowest available commissions.

You have a fast computer – Prices of computers have gone down considerably and you only need to spend a few hundred dollars to have a fast computer with enough power and storage capacity. Invest in a reliable computer and do not let technology get in the way of your trading profitability.

You use a professional research service – While you could have an information overload given the amount of information readily available on the Internet and other sources, it is wise to use a reliable research or newsletter service that may provide some guidance on specific trades or markets. Use these research services as a starting point to do your own research.

You can find out more about how to trade CFDs in our free CFD Guide