Previous Entry: How Money is Made an an Emini Day Trader
Every year thousands of new traders enter the markets. It's a big step for most people as typically they have very little prior experience with day trading. Some have just been hobbyist traders in the past, while others have only recently been introduced to the markets but felt an instant connection that made them eager to learn how to start day trading.
It's likely that their previous education and career have done little to prepare them for their new endeavor so they understandably are unsure of exactly where to start. As people begin to seriously consider what it will take to become a day trader they often have some similar questions that come up:
How do you find a good broker? What trading platform should I use?
How much money do I actually need to get started as a day trader?
Should I join a training program and/or purchase a trading system?
These are all important considerations that someone needs to deal with before they can make their transition into day trading. In this article, Part 4 of the Emini Day Trading Series, we will answer these questions for the aspiring trader so they can be better prepared before entering the trading arena.
Understand Your Role as a Trader and What Lies Ahead
Without a doubt, the most important thing that a trader needs before they start day trading is the right mental mindset. This is a combination of realistic expectations and confidence in your trading approach.
It's vital that an aspiring trader fully understands the process of becoming day trader. Trading is a skill like any other, which means it takes time, effort and persistence to develop. People often ask exactly how long it will take for them to make the transition to consistent, professional day trading but the honest truth is that there is no answer that fits everyone. Each person has a different learning curve depending on their focus level, determination, the kind of training/coaching they undertake, and their own unique psychological profile.
Some traders are able to very quickly transition from Simulated trading to Live trading and can begin to trade effectively within a matter of weeks, while others may take months before they feel confident enough to risk real money in the markets. The bottom line is that both of these are completely acceptable progressions for a trader. What's important is that you take the time you need to develop your skills and build your confidence before you start putting real money on the line.
This is not a race with other traders - it's only about your own long term development and results. Trading is a skill you will have for the rest of your life, so don't rush yourself or put big demands on your performance right from the start. Take your time, build confidence in your skills and trading edge, and consistency and profitability will come.
Find a Reputable Broker
One of the great things about the futures market is that there are quite a few reputable brokers out there. Unlike some markets, such as Forex, futures is highly regulated and all trades go through a central exchange which means brokers are more accountable for their dealings with clients.
When it comes to brokers your best bet is almost always to ask other traders who they're using and if they're pleased with the broker's performance. Traders are rarely afraid to express their displeasure with a broker they've had issues with in the past so you can usually get a very honest assessment of a broker after a quick search. There are a number of trading forums out there that have entire sections dedicated to broker questions and reviews, so that would be a good place to start. Do a bit of research, find a company that seems to fit your needs, and then go ask other traders about their experiences with that particular broker. You'll quickly find out all the good and bad there is to know.
If you don't know many other traders or where to start we do have a couple suggestions that many people at STA use. While we don't endorse any particular company we've heard a lot of positive things from other traders about NinjaTrader Brokerage (previously Mirus Futures), Interactive Brokers and Global Futures (for Canadians). NinjaTrader Brokerage is quite popular with newer traders as you can open an account with as little as $1,000 (the Pattern Day Trader rule does not apply to futures) and actively trade thanks to the generous leverage and margin requirements. Some brokers, like Interactive Brokers, require a larger initial account size to get started ($10,000 minimum) but also let you trade a wide range of instruments including futures, Forex, and stocks.
At Samurai Trading Academy we generally suggest opening a larger account to start if possible (at least $5,000 - $10,000) to keep better control of your risk per trade but there are advantages of the low barriers to entry with brokers like NinjaTrader Brokerage or Global Futures can be very helpful to the developing trader.
Choose Your Trading Platform
When it comes to trading futures, you have a number of options for your charting platform. The most popular these days are NinjaTrader and TradeStation, though Sierra Chart, MultiCharts, and some other charting packages are sometimes used by retail traders as well. We feel the best options out there in terms of support, features, and indicator availability are NinjaTrader and TradeStation so we'll focus on those packages and leave a more thorough analysis of additional trading platforms for a future article.
Most platforms are quite similar with only small differences in features and ease of use but the costs can differ drastically. You should look to treat your trading like any other business, which means you should always be keeping a close eye on your various costs. If you are a new trader who is just getting started in the futures market the importance of keeping your costs low can't be overstated.
This platform one once the young upstart when they first appeared in 2005 but in recent years has become firmly established amongst many professional traders. NinjaTrader is a very powerful platform offering numerous customisation options while still being user-friendly and it continues to improve. It also has a built in Chart Trader function which allows you to easily place your orders directly on the chart itself rather than through an order matrix which makes trade management a breeze as stops and targets can quickly be adjusted with a couple of mouse clicks.
Another great thing about NinjaTrader is that it's free for those who only want to use the end-of-day charting and the excellent simulator function. The simulator in NinjaTrader is called Market Replay and it's fantastic as it allows traders to run prior days in real time with high quality data, almost as if they were trading live. This is extremely useful for those who are just starting to develop their trading skills as it allows them to get a great deal of trading experience on their own schedule, and all for free.
If you decide to go live and trade with your broker directly through your NinjaTrader charts then there is a cost involved but it's quite reasonable compared to many of the other options out there. You can buy a lifetime license for a one-time fee but most new traders will likely prefer the option of leasing the software in their first few months to test drive the platform:
- Lease from $50-60 per month or
- Buy for one-time fee of $995 (there are no future monthly costs if you choose this option)
TradeStation is one of the old dogs out there as its been around since 1991. For a while it was one of the few options for retail traders but over time more and more competitors have entered the market and made up ground on the former leaders. TradeStation is still a powerful and full-featured package that some traders prefer, but it's also very resource heavy and not as user-friendly as it could be. While other platforms continue to improve, TradeStation often seems content to just stay where they are which has allowed others to catch up and in many ways surpass them.
The other issue with TradeStation is the high monthly costs. If you use TradeStation as your broker (we don't recommend this due to some of the feedback we've received from other traders) they will give you free access to their platform as long as you meet minimum requirements. If you just want to use it for charting and trade through another broker then the cost per month is substantial:
- Lease from $250 per month plus data feed costs. Limited to charting and simulated trading.
- Around $20 for data feed but free platform use if using TradeStation as broker and taking 10 round-trip trades per month. If you don't meet these requirements the cost is at least $100 plus fees per month.
Requirements for Your Trading Computer
There's a huge range of possibilities for trading computers depending on what you need the machine to do. Some traders use their computers to run highly detailed simulations or introduce resource heavy algorithms and robots to provide them with analysis of the market. Others simply believe that the more screens they have the more quality trading opportunities they can find (this is usually far from the truth), and for obvious reasons running 10 screens at once requires a powerful machine and multiple video cards for outputs.
Here at Samurai Trading Academy we focus on a single market with a single chart. We use only a few indicators that are not overly complex so our charting requires very little in terms of resources from a trading computer. Not only does this approach improve our results by avoiding unnecessary complexity, it also provides us a great deal of flexibility when it comes to the computers we use for trading. We are able to use moderately powerful PCs and laptops (or even light-weight and thin ultrabooks) to do our trading, which allows us to trade effectively from anywhere in the world as long as we have a stable internet connection. Better than buying a $5,000 "trading computer" which is complete overkill for the task and only sits in your office, isn't it?
- Processor: Intel i3 or AMD equivalent - The newer i3, i5, and i7 series of processors (mobile or desktop version) are all more than capable of handling the day trading we do at STA.
- RAM: 8GB - Your OS and other programs will likely run better with more RAM but with just your charting package open all you will need is 8GB.
- OS: Windows 7 or Windows 10
- Processor: Intel i7 - The i7 has hyper-threading which some trading platforms don't take full advantage of yet but likely will in the future. An i7 is a good idea if you do multi-tasking and for future-proofing.
- RAM: 8GB+ - More than 8GB is nice but unnecessary unless you're running detailed simulations. Most mid-range PCs and many laptops come with 8GB of RAM these days.
- OS: Windows 7 or Windows 10
The Costs to Start Day Trading
The Barriers to Entry
People commonly get in touch with us to ask the same thing - how much does it really cost to get started day trading? Many of these people have little experience in the markets and have decided they want to learn more but aren't really sure about everything that's involved. For example, many people think that to get started day trading you need a minimum of $25,000 for your account but this isn't the case. This regulation, called the Pattern Day Trader Rule, only applies to stock traders but not to futures traders. In futures you can open an account and start trading a single contract with an account only a fraction of the size.
When it comes down to it, starting a day trading business actually has much lower costs than almost any other business out there. Opening a store has costs in rent, employees, furnishings, licenses, and much more. Entering a franchise agreement often requires tens of thousands of dollars up front, if not hundreds of thousands. These lower barriers to entry for day trading are a bit of double-edged sword, as the ease of access means some market participants enter trading without much in the way of preparation. However, for those who take the optimal path to day trading success by getting quality training or doing a great deal of self-study and practice before taking on large risks, the entry requirements for day trading futures are a huge advantage.
A Quality Trading Education
Probably the most important consideration is what sort of trading education you will get to accelerate your development. While it's possible for self-motivated traders to develop into professional day traders entirely on their own, this can often be a lengthy and difficult process. When using unproven systems there is usually a great deal of trial and error and many mistakes are made along the way (even with robust backtesting and paper traded results) which makes getting started a rocky road for many. In most cases, the losses that an under-educated trader incurs are far more than what quality trading courses, training, and coaching would have cost them.
The advantages of getting a good trading education are numerous. A good training program will not only provide you with a proven system that professionals use in the markets every day, but also the ongoing support and training in a live environment that's absolute crucial to your success. When it comes to trading education and coaching in futures there's a lot of options at a wide variety of price points out there. Don't be fooled - the price rarely reflects the quality of the actual service.
You don't want a program that just throws a few hours of videos your way and then sends you out on your own. Regular feedback, advice, and personal support are crucial to trader development. What's important is that you find a trading approach and educators that you are comfortable with because quality trading education is a very personal thing. Everyone has their own way of learning, and their own pace, so be sure that you choose a program that has you in direct contact with a mentor at all times. This personal contact is an absolute necessity if you want to truly accelerate your learning curve.
Costs Breakdown to Start Day Trading
Something to keep in mind about the cost breakdown below is that not all of these costs need to come at once. As you will need some time to undertake your trading education and skill development you should not be trading with real money in the initial phases of your transition into professional day trading. NinjaTrader is completely free for simulated trading, which means that for the initial weeks/months you will not need to pay anything for your trading platform or open an account with a broker.
Initial Account Capital: $5,000 - $10,000
Trading Platform: $180 for 3 month NinjaTrader License
Education and Trading System: $1,000 - $10,000 (offerings and extent of personal mentoring vary greatly with different educators) or free if taking a self-study approach (though this may be a more time-consuming path)
Emini Day Trading Series Articles
Part 1: What Are Emini S&P 500 Futures?