Can you pursue day trading starting with a $1,000 trading account balance? Is it enough money? Most certainly! Will it be easy? Yes, maybe…not exactly! I am just being honest with you. Regardless of that honesty, it is very doable! Learning how to trade the financial markets can be a very time-consuming task. Day traders invest in technology, education, and capital to trade with.
Whether they have a large or small account, a great day trader will take time to practice and back test a trading strategy before trading capital and risking their own money.
If you only have $1,000 to trade with, it is a starting point. Here are some tips on how to trade and grow a small account that may be helpful to you!
Cash Account vs Margin Account
If you start trading with a small account of $1,000, you need to make sure you have a good broker and a trading platform to work off of. You also need to determine if you are opening a cash or margin account.
Having only $1,000 in capital, a cash account would be best to start day trading with.
With a cash account, you will only be able to purchase what you can buy. This may seem limiting, however, there are products you can trade that allow you to purchase more for less money.
A cash account will also allow you to make numerous trades up to the amount of money in your account daily, avoiding pattern day trading rules (PDT).
A margin account allows a trader to essentially “borrow” funds to trade with over and beyond the capital they have. A margin account must have a minimum account balance, is subject to interest, margin calls, and also pattern day trading rules just to name a few aspects.
Pick your Product
When you are day trading stocks with a smaller trading account size, you need more bang for your buck!
When day trading starting with $1000 it is best to focus on one ticker, the goal is to pick a financial asset you can buy and sell on the same day that can be consistently profitable and over a period of time, build your account.
What products are best for a small trading account? Trading stock options, futures trading and bonds, and trading forex to name a few. All come with risk so don’t think one may be less risk than the other.
Do your research and make sure your broker supports the financial instruments you desire to trade. For instance, many brokers will allow clients to trade stocks and their options but limit forex market trading.
Options Contract Example
Let’s go over an example of a stock option and how trading this type of asset can be done with $1,000.
If you are not familiar, a stock option is a contract between a buyer and seller. The buyer has the right but not the obligation to buy or sell the asset at a determined expiration date at an agreed-to price, which is known as the strike price.
An option contract is generally 100 shares. If the value of the contract is $1.80, the total cost of the options contract, your investment, is $180 ($1.80 x 100 shares).
If the stock is trading at $358 per share, this is a deal! Essentially, you are buying temporary control of 100 shares of the asset for $180 instead of owning one share for $358.
What is the catch? It is the expiration date. The goal is to sell the contract before expiration for a profit. If the value of the stock goes in the direction of your position, the value of your option contract goes up.
In our example, if $1.80 is our original contract value and that rises to $1.95, that is a gain of .15 cents. Multiply that by 100 shares, and you have a $15 profit.
Once you start increasing your contract size from one options contract to multiple contracts, your account can build up rather consistently.
In our above example, that $15 on one contract would be $75 profit on five contracts. Some day traders make this in a matter of a couple of candles.
Day Trading vs Swing Trading with $1000
You can start day trading or swing trading with $1000. What is the difference?
Well, day trading is where you buy and sell your positions in the same session on the same trading day.
For example, a day trader may enter an option call trade position with the same day expiration and sell it in minutes, or hours, at least before the close of the day (expiration). Because time decay is a real concern in options trading, the option contract may be less expensive the closer the expiration date. This allows a trader to risk less capital but have a narrow window to reap profit!
Swing traders hold their trades at least overnight, for a few days, or weeks.
Using the same example of an option call position, let’s say you pick a contract that expires a week from now. The cost of the contract may be more money per trade due to the additional time before expiration. A swing trade may be more expensive and require more capital, but it would have more time to hit your profit goals!
Whether you become a day trader or swing trader, you can manage and grow a small account. It is a matter of preference that is determined by your psychological threshold and the actual trading plan you prefer to use.
Find your Trading Strategy
Whether you are desiring to trade forex, take on futures trading, or trade options contracts, trading opportunities exist for a smaller account!
Every successful day trader knows the key to trading a financial instrument and being consistently profitable is a good strategy. Your trading plan is your edge. That edge should produce more positive results over a series of trades.
There are many forms of technical analysis and strategies available out there to explore for someone who day trades the markets or swing trades using less capital.
Here are some trading tactics you may want to look into:
- Supply and demand zones
- Support and resistance levels
- Breakout trading
- Trading volume and price action
- Candlestick patterns
- Technical indicators
- Trend trading
Regardless of which strategy you adopt, you must exercise discipline to achieve your desired results. Keep a journal of your trades and keep track of your profit/loss win ratio.
Keeping tabs and constant focus on your trade entries and exits and their results will help you determine if your strategy is working well enough or if improvements need to be made.
Implement Good Risk Management
Losing money day trading stocks or other assets will occur. Most experienced traders learned the hard way that to survive trading, you need to manage risk well. This is especially important with smaller trading accounts.
Market conditions can be unpredictable even with the best trading strategy and technical analysis implemented. Always have an exit plan in every single trade you put on. Know how much you are willing to lose per trade and analyze your risk-to-reward ratio before entering.
Whether you have a mental or physical stop loss in place, adhere to it. Don’t let emotions get in the way of your trading success. You WILL lose money. The idea is to gain more than you lose over several trades!
Summary: Day Trading Starting With $1000
The capital, or amount of money, you risk while day trading should be money you are willing to lose. Not the money you need for bills, living expenses, etc. When you begin your journey in day trading starting with $1000 it is best to focus on one ticker. This will give you more buying power and flexibility.
Trading can be considered a high risk activity. So don’t day trade with money you need. If your goal as a new trader is to someday make trading your full time job, learning good risk management is crucial.
Get prepared, have a trading plan, and practice! Paper trading is a great way to learn and grow before taking on that first trade, risking your hard-earned money in a live trading atmosphere.
You can day trade with $1000 and build an account. Heck, you may find yourself someday making a decent living day trading! If it happens to be your dream job, what is stopping you?
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”