How much money do you need to day trade? It depends on the markets you want to trade. It also depends on what your goals are for the size and timeframes for a return.

Each trading product has its own set of rules for how much money you need to day trade. Some products will let you open a small account, others will need a larger account.

E.g. Day trading stocks and options on a small account is possible, but has restrictions. If your account is not large enough, you’re limited to the frequency of trading allowed.

Day Trading With Little Money

If you’re reading this article you may be someone who is looking to day trade with little money in your account. It’s possible to start trading with a small account, however you will find some limitations depending on how much you intend to invest.

In this article you’ll learn some of these limitations. You’ll also learn what your options are for trading a small account.

How Much Money do You Need to Day Trade Stocks?

Stocks and Options trading have the strictest rules for day trading. They also have the largest minimum requirement for money needed to Day Trade. This makes trading stocks the least accessible form of day trading for beginners.

Limitations For Day Trading Stocks

In 2001, the pattern day trading (PDT) rule was introduced to trading stocks and options. The PDT rule is a method for limiting risk in the market.

The PDT Rule limits the number of day trades that can a trader can make on a small account over a 5 day period. A day trade is a trade opened and closed within the same trading day.

The restriction applies to traders holding a margin account. Traders with a cash account don’t fall under the rule, but cash trades take up to 2 days to settle. For someone with a small account, the cash account provides the same problem of low liquidity.

If you hold a margin account and want to place as many day trades as you’d like, you need at least $25,000. If your account falls under this level you will not be able to day trade without restrictions. You will need to build your account back up to day trade unrestricted.

If you want to day trade an account under $25,000 you will be limited to 3 day trades per 5 day period. Or you could choose to trade a market that allows smaller accounts.

Workarounds to the PDT Rule

It is possible to work around this restriction, some are impractical and others are risky.

The impractical option is to open several brokerage accounts and split your funds. Doing this you will be able to alternate your trades across each broker. This will allow more frequent trading. The trade-off is keeping track becomes more difficult and the extra admin is tiring. When you’re day trading you want to concentrate on trading, not switching between trading platforms

The risky workaround is to open an account with a broker that doesn’t sit under SEC and FINRA rules. This means your account is with an unregulated broker, typically is offshore. This is risky because you’re open to scams and you are dealing with brokers unrestricted in what they do.

The other workaround is to have a cash account. The issue is, a small account won’t have buying power available while waiting for trades to settle. If cash takes 2 days to settle into your account and you are trading 1,000 or so, it will be hard to trade every day.

For a beginner trader $25,000 is a big commitment. The best workaround for the PDT rule is to trade a market that doesn’t have the rule.

How Much Money do You Need to Day Trade Forex?

Forex is a much more accessible market for beginner day traders with not much money to invest. Some brokers will allow you to open an account with as little as $500.

Forex is also more liquid than Options and some stocks. The problem with Forex is that it is less transparent than other markets. Forex is also more open to manipulation as compared to a market like Futures.

How Much Money do You Need to Day Trade Futures?

There are a few reasons why Futures are more friendly to small account traders. There is no PDT rule, and you can open an account with as little as $400.

Futures provide leverage which means you enter a trade at a fraction of the costs of a contract. This means that both profits and losses are amplified. The amount required to enter the trade is called the margin.

When entering a trade there is an “initial margin” which is the amount that your account must hold in order to place the trade. The initial margin describes the cost to place that trade for that particular trading day. The initial margin can be as little as $50 per contract. To hold the position over-night you will need to have enough for the “over-night margin” which can be 10 x the size. If you don’t have that amount available the exchange will close your position automatically.

Futures also provide E-mini and Micro E-mini markets. These markets have much smaller margins and are suited to traders with limited funds. These traders have access to massive volume in the largest markets in the world, trading on as little as $2,000 to $3,000.

Although you can trade an account of $400 it may be easier to reach your goals trading $2,000-$3,000 minimum

For these reasons, the Futures markets are the most accessible for traders with small accounts

How Much Money do You Need to Meet Your Goals?

If your goal is to make $100 per day trading but your account size is only $400 that’s not realistic. To achieve your goal, you would need to risk far too much of your account per trade, or trade far too often.

There are 2 things to consider when deciding how much money you need to day trade. First you need to know how much you want to aim to make per day. Second you need to know how much you are willing to risk per trade and max risk per day.

We recommend you only risk around 2-3% of your account per trade to limit risk. You should only look to make the best trades and limit your trades to 3 per day.

The following is an over-simplified example.
If you have an account of $1,000 and you place 3 trades, your total risk is $60 for the day. Remembering that you’re risking 2% per trade. If your goal is to make $100 that day you are attempting to make 10% of your account while risking 2% which is unlikely.

To find your required account size consider the amount you want to make. Think about a reasonable percentage return you could achieve on average per week.

This is a generalised, simplified example, you decide what you think the right starting amount is. Remember that you will have losing trades that will affect your return, adjust for that.

There is no shame in adjusting your goals for return if you don’t have the funds needed. If you can compound your returns your account begins to grow at a faster rate.

A Note on starting balances for trading: When you first start trading it will be on a simulated account. You shouldn’t be thinking about how much you’ll be trading until you have proven yourself.

Can I Make Money Day Trading?

Whether you can make money day trading comes down to you. There are many people who are able to make money from day trading, but there are even more that fail.

There are many reasons that day traders fail, if you avoid these mistakes you increase your chances of being successful

If your goal is to make money day trading, you need to have the knowledge, skill, mindset, and tools to be successful first. You need to have each of these to be a good trader, not some, all of them. The reason so many fail is that they don’t take trading seriously, or put the work in.

As with any job you need to learn the theory, practise the practical, and keep learning from experience.

Can I Make Money Day Trading Part Time?

Day trading, by nature, is a part time gig, that’s one of the best things about the day trader lifestyle. Day Traders seek to work for up to only 2 hours per day including pre-trading and post-trading admin.

Assuming you want to trade everyday, that makes it around 10 hours per week. That’s a small amount of working hours compared to typical part time work.

If you can be consistently profitable in the long-term, you should be able to make money day trading part-time. To achieve this you need to have put in the practice on a simulated account and proven yourself. It’s important to remember that all day traders have losses and profitability isn’t guaranteed.

How To Make Money Day Trading Online

To make money day trading online you need to complete all of the following tasks:

1. Learning What to Day Trade

You’ll need to know what it is that you want to trade. Each market has its own pros and cons, find the market that best suits your needs. For example, if you want to trade a small account, trading Options might not be for you as you need $25,000 to start.

Other things to consider would be:

  • Level of risk
  • Liquidity (if you need quick access to funds)
  • Time of day you want to trade
  • Diversity of the market

2. Learning How to Day Trade

It might seem obvious, but some people do try to trade before learning how to do it. While you can get a rough idea of how to trade online, via YouTube or some other resource.

The problem is that this is not enough, there is a little more to it. You might learn the basics on how to find a good trade, but what do you do when you’re IN that trade? They often leave that bit out.

You want to learn to trade an existing trading strategy. There are many different day trading strategies out there to choose from. Find a strategy that has a proven track record, or one that you can see traded live for proof of concept.

You need to not only understand how to find trades, but also to manage risk, and know where to set targets and trade exits.

Find a reputable day trading educator that will teach all these methods.

3. Practising How to Day Trade

When you learn how to drive, you learn the rules, then you need to complete a certain number of hours practising. With trading, it’s not enough to know the rules, you need to know how to physically trade, as safely as possible.

You can practice your trading on a simulation account that uses pretend money. Most trading platforms have a simulation or “paper trading” function you can take advantage of. This will allow you to learn to use a trading platform and get used to implementing a trading strategy.

Any mistakes you make while paper trading don’t matter. The money lost on each trade isn’t real, it’s a simulation. It’s the safest way to practice your trading strategy, risk management, and trading platform.

4. Gain the Trader’s Mindset

Trading is often said to be 20% skill and 80% mindset, and it’s true. A trader may have all the skills needed, but we’re all human, and emotion brings mistakes.

Building the right mindset begins with practicing on a simulated trading account. Even though the money at risk is fictional, you should treat it like real money. The reason is that paper trading and live trading are 2 completely different things. Once you begin trading with real money, the emotions begin to kick in.

When you do start live trading, start small, build your confidence, gauge your mindset. You can increase your account size when you feel that you have the right mindset.

Bottom Line

How much money you need to day trade depends on the market you want to trade. If you want to day trade stocks or options, you need to start with $25,000. If you want to trade Futures, Forex, CFDs, you can begin with much less. This dictates the minimum requirements based on market requirements.

The other things to consider are your goals, time frames, and risk appetite. Your starting balance needs to be aligned with the outcome that you are aiming for. If you fund an account with $5,000 you can’t expect to make $1,000 per week if that’s your goal.

Make sure you consider all the above before making any decisions. Ensure that the money invested is appropriate to you specifically. If you’re unsure, you could seek independent advice from a financial planner.

Want to get started? Join our Free Trading Class and receive a complimentary eBook for trading beginners!

Free day trading web class