Table of contents:
When does day trading start to pay off and what kind of starting capital is needed? – I will deal with these questions on this page. Day trading is particularly popular and is characterized by fast profits and losses. Many traders would like to live independently from stock exchange trading. From when is this possible and what capital do you need? – Inform yourself in detail!
” AS DAYTRADING IS CALLED THE DAY TRADING. ALL TRADING POSITIONS ARE OPENED WITHIN THE DAY AND CLOSED BEFORE THE END (CLOSE OF THE EXCHANGE). TRADING IS CARRIED OUT IN SHORT-TERM TIME UNITS.”
Day trading is so popular because it imitates the normal working day. The trader has fixed working hours. The official stock exchange opening hours are used for this. The positions are opened with high volume and with short holding period. Profits or losses are realized very quickly.
But the biggest reason for the interest in day trading is that one exchanges the normal job for a simple and not exhausting job in front of the PC. Beginners should not underestimate this nevertheless. Day trading can be very exhausting from my experience, because you need a lot of concentration. How much money do you really need to live from day trading?
Day Trading is possible with any type of start capital
Daytrading is possible with almost any seed capital. You can already start trading on the financial markets with minimal amounts. Whether this is really worthwhile and from what amounts it is worthwhile, we will clarify on this page. The upper limits for your capital are open. Even trading with very large positions is very well possible in liquid markets.
With almost all brokers you can open an account from 100€ or less. However, you should know beforehand which financial product you want to trade. Not every financial product is suitable for small amounts. For example, futures contracts are suitable for only very large capital, as the position sizes are automatically already very large.
For small and large amounts, the derivatives Forex and CFD (contracts for difference) are suitable. The position size can be adjusted as required and you can trade almost all markets. You can find more detailed instructions on this at ➔ “Daytrading”.
Facts about capital size in day trading:
- Day trading is possible with just a few hundred euros.
- The minimum deposit for most brokers is under 100€.
- Not every financial product is suitable for small capital.
It is important for a trader to use a trusted provider. In the following lines I would like to give you a brief overview of possible providers and their characteristics.
Nearly every Forex and CFD broker offers the denomination of positions. The position sizes are given in lots. This term comes from the English trading area and describes the size of 100,000 units of the underlying asset in Forex (currencies). When trading contracts for differences on stocks or indices, the position size is specified in contracts. The advantage of using an online broker is that you could also trade 0.01 lot. You need little capital for this.
Traders can adjust the position size to any decimal place. For example, 10.50 lots or contracts can be traded. So the position sizes give a trader a margin for small or large capital. However, for very large position sizes, there may be restrictions imposed by the broker. This situation is never achievable for most traders. The best thing to do is to contact the broker.
Choose a suitable broker
The choice of a broker for day trading is not very easy, because there is a very large offer on the Internet. The characteristics of a provider should be compared exactly with each other to come to a good result. Unfortunately, many beginners fall for empty advertising promises and can hardly distinguish which broker is the best and cheapest.
Criteria for a trustworthy broker:
- Regulation and licenses
- Professional support in German
- Low minimum deposit
- Trading is possible with small and large capital
- Fast execution
- Stable trading platform
- Favourable trading fees
In the table below you can find out more about the best providers in comparison. With more than 5 years of experience in the financial markets, I have tested many brokers and present you my results in the following table.
XTB is a very great provider with a BaFin regulation and branch office in Frankfurt. Real money accounts can be opened here from 0€. XTB scores with a good overall package and a large selection. BDSwiss is suitable for traders who want even lower fees and special offers. A high leverage of 1:400 is also available.
Using derivatives with little capital
Day traders mostly trade derivatives. They are based on an underlying asset (share, commodity, etc.) and a contract is traded on this value. The contract is underlaid with a lever. Leverage products are available in many versions. Only a small minimum capital is required for large positions. This is also called margin trading.
You can trade larger position sizes with a certain security deposit (margin). The broker allows you to do this and, so to speak, lends you capital. An advantage in day trading is that the capital costs are eliminated because the positions are closed before night. With a leverage of 1:500 it would be possible, for example, to trade 500€ on the market with only 1€ security. This is an extremely high leverage and does not always have to be exhausted and the risk can be determined with the position size.
- Derivatives allow the use of leverage.
- You can trade larger positions with a small security deposit (margin).
- In this way, profit can be increased even with small capital.
“THE LEVER CAN HAVE BOTH POSITIVE AND NEGATIVE EFFECTS. THE RISK INCREASES WITH THE POTENTIAL PROFIT.”
CALCULATION: FROM WHEN DO YOU START LIVING FROM DAY TRADING?
In the following calculation I would like to answer you, from when on it is possible to live from daytrading. The prerequisite is of course a profitable trade. However, many traders already fail to do so.
- Hit rate of 50%.
- Profit-risk ratio 1:2
- Money Management 1% of total capital
- Expenses and taxes – 30%
The trader has a 50% hit rate and wins every second trade with a ratio of 1:2, which means that he has to win 1 trade to make up for 2 losses. 1% of the total capital is used. As an example I take an account size of 10.000€.
Is it possible to live on a 10.000€ account?
After 10 trades you get a total profit of 500€. The week has 5 trading days and the month has an average of 20 trading days. In one month this would be an income of about 2000€. The trader would have to increase his trading frequency or capital for a bigger profit. For example, if you trade 20 times a week, the profit would double.
- Profit: 20 trades per week = 10 losers (-1000€) + 10 winners (+2000€) = 1000€
- Calculated on the month x 4 = 4000€ profit (example trading costs already deducted)
- Minus taxes and expenses = 2800€ (insurance not included)
Theoretically you would make a profit of 2800€ if you placed 4 trades every day. This example is very theoretical.
Disadvantages of the theoretical calculation:
- The market is not the same every day, sometimes there are no opportunities
- A payout on the trading account reduces the potential risk
- Account growth is not possible with this strategy
My experience: So much capital is needed
The upper calculation has shown that it would even theoretically be possible to live from day trading with an account of 10.000€. But this is an extremely short calculation example and the trading frequency must also fit. Because of the disadvantages listed above it is at least recommended to use higher capital.
An account growth should also be possible. Therefore, from my experience it is better to increase the capital and try to live at least with a capital of 20,000 € – 30,000 € of day trading. Fluctuations in an account are normal and should be cushioned by the capital. In my opinion, with a capital of 50.000€ on the account you can live optimally from day trading and also ensures additional account growth.
A larger account has several advantages.
Do not try to live from day trading with too little capital, because otherwise you take too high risks outside of the money management of 1%. This can mean the end for your account.
Cash out and a simultaneous account growth is the optimal condition for a daytrader.
Conclusion: The right day trading seed capital
Day trading is possible with any starting capital. You can open a real money account with the broker presented above for as little as €0. It is important which goals the trader has. Does he want to live from it or does he want to build up an additional income besides his work. Both scenarios are possible. Small accounts can be increased quickly with the appropriate levers.
In the above calculations I have also shown you which factors are involved in the question: “When can I live from day trading? Different set screws play a role. The calculation was done with a very small account which is one of its limits.
From my experience it is better to use a higher capital in the range of 20.000€ – 30.000€. Optimal from day trading can live from my experience from a size of 50.000€. The trader should also not forget that every payout reduces the account size and thus has an influence on the money management.
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