What Should Your Account Size Be?

Trading stocks for a living can certainly be a challenge in and of itself. But it can be very rewarding as well. Some professional traders make it look easy because they have been doing it for a long time. It certainly takes money to make money in this business.

You have to have a confident and winning mindset.

In order to determine what account size you should have, you have to start with what type of trader you want to be.

Do you want to trade every single day? Do you want to trade only a few times a month, or year?

There is a huge difference in the amount of capital you need to trade with if you want to trade as much or as often as you want every single trading day. This is called intraday trading.

It requires that you have and maintain a minimum account balance of $25,000. This is known as the pattern day trader rule.

If you don’t know what intraday trading is, it is basically buying and selling stocks within the same day with the goal of making short-term profits during the trading day.

This differs from swing trading or long-term trading, where you buy stocks and you hold them for multiple days or weeks, or even years. Has your grandpa told you about the Coca-Cola stock he bought in 1980 and still owns?

Yea, that’s long-term investing!

So that being said, don’t start with less than $25,000 if you want to day trade. Sure there are some offshore brokers that you could use to day trade and start with less, but I don’t recommend that approach unless you have practiced trading for a while (on paper or in a simulated account) and you have money that you can afford to lose.

If you want to dabble into trading and start small (I am talking 1 or 2 shares) at a time, certainly you can open an account these days with some mobile apps like RobinHood and buy 1 share of Tesla. You can set aside a couple of hundred dollars a month and buy stocks.

There are people doing that all the time.

But if you are looking to make trading a career, or a business, and you want to make a living from it, truth be told, you are going to need the right capital.

Just as important you are going to need a strategy and risk management process to trade so that you can develop consistency and minimize losses.