For freewheeling financiers of all stripes, day trading stocks is one of the most popular ways to enrich one's portfolio. Hundreds of thousands of people in the US alone now regularly participate in day trading.
Essentially, this is the practice of buying stocks and then selling them within the same working day, hoping to capitalize on daily price fluctuations. When done right, it can provide a significant boost to your portfolio and shore up your long-term earnings potential.
However, you might be wondering how much money do you need to start day trading stocks. There are a number of regulatory measures in place that stipulate how high your initial capital investment needs to be.
Knowing what these are is vital if you wish to enjoy a successful career as a day trader. Read on to find out everything you need to know about day trading stocks, forex, and futures.
1. How Much Money Do You Need to Start Day Trading Stocks?
So, how much money do you need to start day trading? If you wish to day trade in the US, you will be subject to the limits set out in the Pattern Day Trader Rule (PDT).
This stipulates that traders who wish to make three or more day trades in a week must have a minimum account balance of $25,000. Leverage cannot be counted towards this balance.
If your account balance falls below $25,000, your trading activities will be ceased until your balance is back up to scratch. When asking how much money do you need to start as a day trader, this is the short answer.
2. Getting Around the Pattern Day Trader Rule
When asking how much is needed to day trade stocks, the PDT rule is not the only game in town. You can, of course, choose to make fewer than three day trades per week, thereby reducing the account balance minimum.
However, there are also other options. As this comprehensive day trading for beginners guide explains, 52% of US adults invest in stocks.
Obviously not all of these have a spare $25,000 lying around. Many of these traders use accounts that allow them to trade and speculate on US stocks through a brokerage platform, allowing them to avoid the PDT rule.
3. How Much Does It Cost to Day Trade Forex?
Trading on foreign exchange (forex) markets is typically much cheaper than day trading stocks. Since forex trading is a global market with thousands of licensed platforms, startup costs can be as low as $50.
Other assets, such as futures, also have lower minimum balance requirements. Of course, forex is a highly volatile asset. This means that it is recommended to start trading with a higher account balance.
This way, you can more easily absorb incremental losses in a highly volatile market. Just because there are no legal minimums on trading something does not mean you should go into it with the lowest possible balance.
Learn More About Day Trading Stocks
Now that you know how much money do you need to start day trading stocks, it's time to think strategically.
To make a profit when trading stocks, knowledge and expertise are key. Fortunately, you can consult our in-depth Investing section to get the latest stock trading advice from some of the sharpest minds around.
