For a very long time, money has been the thing holding people back from trading. It’s quite ironic actually; because it takes a lot of money to get started, people are unable to make money in the markets. You need money to make money. This is just how it’s been for a very long time, and this mindset has kept many people from even attempting to enter the world of active trading.
A Look at History
The reason why this has happened is because of the legal restrictions that day traders are tamed by in the stock market. Because it can take a few days for brokers to settle trades, a pattern day trader is required to have a margin account. Under current laws, the minimum amount leftover in a margin account after trades are executed is $25,000. Most prospective beginning traders do not have this amount easily on hand. Furthermore, the magnifying effect of margin can help traders to make more per trade, but when predictions are incorrect, margin can actually hurt you a lot. In other words, although there are great benefits to day trading stocks, there’s also great risk. It’s not for everyone.
Where we are Today
This doesn’t need to be the case anymore, though. Many brokers have found ways around this in order to help others enter the market. Because of the internet, new markets have opened up for traders. The two main markets that have opened that target short term traders are the Forex and the binary options markets. Both of these have ultra short term type of trades. You can keep some open for less than a minute, if so desired. They also have tiny minimal entry points. Most traders that use these markets can open an account for as little as $500. In reality, a Forex trader can start making really good money right away with as little as $2,000, while the number is slightly less for binary options traders, depending on experience, of course.
In the Forex marketplace, spot trading was created after the internet boom. This allows traders to put up only a few pennies of their own money at a time and still make a profit thanks to the use of leverage. It is similar in nature to margin, but it does not have the same vigorous restrictions behind it. You can multiply your losses if you are not careful, but most brokers have safeguards put in place so that you can only lose a certain amount.
With binary options, you have even more control of your losses. You can only lose a certain amount per trade, and you know exactly what that number is before you begin. If you enter a trade for $100, the most you can lose is that $100. The downside is that your earnings are also limited. But because they are such a high rate—usually around 80 percent, or so—this risk evens out. By trading either currencies or binary options when you have a distinct advantage on price movement, you can manipulate your chances of making more money to your favor.
One interesting side note is that many traders use both Forex brokers and binary options brokers at the same time. You can trade currency pairs as binaries, but the different types of flexibilities both have different types of advantages for traders. How you use these is up to you and whether or not you can be profitable in both.
Where are we Going Tomorrow?
If you want to day trade stocks, you can. If you don’t have the capital yet to do so effectively, these markets are a great place to learn how things work and start growing your money so that you can get to a point where the stock market is going to be as profitable as possible for you thanks to the money you’ve made and the knowledge that you’ve gained.