How to Day Trade for a Living

What Broker to Use?
For day trading, you need an awesome broker. You don’t need a good broker; you need an
awesome broker. Your broker is your vehicle to trade. If you have a bad broker, you lose money,
even if you are trading properly and accurately because a broker eventually has to fill your order
on time and at a good price. There are many brokers out there with various software and price
structures. Many of them are great but expensive, some are terrible but cheap, and many of
them are either terrible or expensive or both. For the sake of keeping this book short, I will not
start reviewing all of them, but I do have additional information on my website about brokers
and which ones to choose. If you visit my website, you will have access to that information. I
will share here though what broker I am using and why.
For several good reasons, I am currently using Interactive Brokers or IB
(
www.interactivebrokers.com
). First, I live in Vancouver, Canada, and IB allows me to have my
tax-free and registered retirement accounts for day trading. Many brokers do not allow you to
have tax-free or retirement accounts for day trading. Second, IB is an inexpensive broker. It
charges you less than $1 per trade. Another reason I am with IB is because IB does not require
people in Canada to have a minimum of $25,000 for day trading. If you are in the USA, you
will probably need a minimum of $25,000 for day trading. You can read further about the
“Pattern Day Trade” regulation online.
Do remember that brokers will give you 3 to 6 times leverage. If you put in $30,000, you're
going to have $120,000 in buying power (a leverage of 4:1 in this case). That leverage is called
the “margin”, and you're allowed to trade on margin, but you need to be responsible about it. It
is easy to buy on margin, but it is also very easy to lose on margin. If you lose on margin, your
broker takes the loss from your main money account. Therefore, margin is a double-edged
sword. It provides you an opportunity to buy more, but it also exposes you to more risk. There
is nothing wrong with buying in margin, but you do have to be responsible.
Margin is like a mortgage for your house. You borrow a significant amount of money and buy a
residence. Banks will give you a mortgage, but they won’t take any responsibility or risk on it.
For example, imagine that you put $100,000 down and borrowed $900,000 on a mortgage (10:1
leverage) from your bank to buy a $1,000,000 house. If the price of your house goes up to
$1,200,000, you still owe the bank the original $900,000 plus their interest. So the extra
$200,000 is your own profit that actually came from margin leverage. You couldn’t have bought
that house without mortgage leveraging. Now imagine that the price of the house drops to
$900,000. You still owe the bank $900,000 plus their interest, so the drop has hit your main
$100,000 and you have lost all of your original down payment of $100,000. That is the other
side of leveraging. Therefore, you need to be responsible about when and how much you use
your account margin.
When a broker sees that you are using leverage and losing money, they might issue a “margin
call” to you. A margin call is a serious warning and day traders must avoid getting them. It

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means that your loss is now equal to the original money you had in your account. You must add
more money or else your broker will freeze your account. If you need to know more about
margin, leverage or margin calls, check the broker’s website, do some research on the Internet,
or ask me or other traders in our private chatroom at 
www.Vancouver-Traders.com
).

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