How Much It Takes to be an Active Trader

Active trading is an investment strategy which uses financial assets’ short-term price movements. Becoming an active trader means taking advantage of the fluctuating prices of the high-demand financial instruments, most commonly stocks, currencies, options, and derivatives.

 

While active trading offers quick and large turnouts, it comes with one of the highest risk among the types of trading. Besides that, traders might find it costly to carry out if they aren’t able to replenish their accounts with profits promptly. The reason behind this is that active trading costs a lot.

 

Commission

The biggest culprit in draining the losing active trader’s pockets is the commissions. Because it involves multiple trades done in the span of a day, commissions are paid for every trade. In a month, an average number of trades could run around 100 and more. So make sure you find the best deals in commission charges.

 

Broker

Your tool to trade actively in the market will be provided to you by a good broker. You would need the money to pay for the software or the trading platform and then you still have to pay for the internet. And if you’re not adept at trading, you might also want to invest in training costs or pay for the advice of an expert. To ensure that you get your money’s worth, you’re  going to use the tools and the skill in the long run after all, find a provider that offers the most comprehensive software, the best execution speed, and an excellent customer service.

 

Capital

The market does not set a minimum capital for active trading but in order for you to maximize the opportunities in trading in this exciting field you would have to follow the brokerage’s set limit. Some brokerages require bigger capital because they want you to have a good solid start while others allow for the minimal capital for other traders to have a chance to trade and use their skills. Whatever the case, the minimum amount is set for the trader’s welfare, whether to keep a position open long enough to profit or to keep a trader in the game for more than just a few trades.

Active trading has the possibility of being quite costly but if you play your cards right, it might prove to be one of the most lucrative types of trading in the industry.