Can You Really Day Trade with $100?
Technically, yes you can day trade with a $100 account. Taking this approach comes with severe limitations and an incredibly low success rate. You don’t have enough wiggle room to be wrong on any of the first few trades in that account. Because of this, although it is technically possible, it is certainly not recommended.
The idea of turning a micro account into substantial gains is enticing, but the reality is that day trading with a $100 account balance has everything to do with luck and very little to do with skill in the first handful of trades. Realistically to start trading a small account $2,000 – $5,000 is recommended. More on that here.
Understanding the Challenges of Day Trading with a Small Account
Day trading with a small account balance of $100 presents let’s just say, unique challenges. With extremely limited buying power you’ll be limited in the opportunities that you can take. Add on top of that you’ll likely have to break the core principles of risk management if you expect any reasonable return.
You will likely be ineffective trading equities, as most stocks that follow tradable patterns are priced $10 and higher. Only holding 10 shares (best case scenario) and having all of your working capital in one trade is bad risk management, and reinforcing a bad habit. Getting into penny stocks because you can buy more shares is just a gamble, not a trade.
Imagine you invest half of your account in a trade, and the price moves with 1 percent in your favor, a very reasonable move for one day’s worth of price action.
$50 x 0.01 = $0.5 profit
To get the reliability of price movement from more expensive stocks, you can look to trade options. However the issue of effectiveness comes back into play. The most effective options on the chain are the ones near the money. If you go the cheap route and buy options far out of the money, they won’t move substantially enough when a normal move in the underlying takes place. If you buy the at the money strikes, you’ll likely have all of your capital tied up in one trade. Oh… and lets not forget about the complicating factor of options greeks. If you aren’t directionally right, and right on timing your option will go to 0 at expiration.
So options are going to be just as difficult as stocks, what about futures? With the advent of micro futures (1/10th the size of mini contracts) you can trade something like the /MES /M2K on margins of $50. So is it possible to day trade micro futures with a $100 account? Technically yes, but because they are leveraged products, you could only trade one contract, and have a draw down cushion of $50 maximum before being liquidated by the broker. To learn more about futures, what they are, and how to trade them check out this article here: How to Trade Futures Contracts
Futures offer the best way to get involved in day trading with a limited account size, and you’re really pushing it to the extremes with a $100 starting balance.
Risk Management and Capital Preservation
If we’re going the futures route, you should focus on preserving your capital and avoiding excessive risks that could wipe out the account in one move. Setting strict stop-loss orders is essential to limit potential losses on every trade you take. Position sizing is completely out of the picture when starting with this amount. You get one contract and one contract only.
You won’t be able to afford the drawdown of volatile events, so trading around the opening bell, economic data releases, and around the closing bell will not work. You’ll likely have to opt for slower periods of the day like the lunch hour, or even the after hours session when volatility is considerably lower due to the lack of trading volume.
If you decide to risk $10 or 10% of the account on the first trade, you better not be wrong. Five of these trades go wrong in a row and you’re out of the game. With a $50 balance you technically can enter a trade, but as soon as there is any drawdown against you, the account will be liquidated making it unrealistic to actually trade with that amount.
The Importance of Education and Practice
For traders with a small account, knowledge and skill development should be the only goal. You should be investing time in learning about various trading strategies, technical analysis, and risk management frameworks. The point of trading with a small account is not to make substantial income, rather to test out strategies and feel the emotions of using real capital. You should be focused on gathering screen time and real live experience. Think in terms of percentages not total dollar amounts. Remember if you’re not profitable with a small account (not necessarily a $100 account – this is an extreme example) you won’t be profitable with a large account.
If you feel like you don’t know where to start with trading education scan this article: Is Trading Education Worth It
Leveraging Low-Cost Trading Platforms
The information age and rise in access to discount brokers has made day trading more accessible and affordable than ever before. Traders starting with small accounts should use low-cost brokerages that offer zero commissions, enabling them to maximize their limited capital. In futures markets, there will always be exchange fees so look out for a broker that offers competitive commissions, not necessarily zero commissions.
Understand that when you use a zero commission broker, it’s very likely that you are paying with a “hidden fee.” That could be as inconspicuous as a lack of technical support, or as obvious as delayed order fills. To make sure you choose a broker that is reputable, walk through this checklist here to determine the minimum requirements a broker should have: How to Choose a Broker.
Building Up Your Trading Account
While starting with a $100 account clearly represents more of a gamble than a serious start to trading, you should view small accounts as a stepping stone towards building a larger trading account. As you gain experience and prove to yourself consistent profitability, you can gradually increase your account size by adding more funds or retaining more of your profits. This will let you scale your profit potential with consistent strategy application while keeping the focus on risk management and reinforcing good habits.
Conclusion
Day trading with a $100 account is technically possible, but is more of a gamble than an actual trading experience. If you can only afford to open an account with $100, you’re better off saving the $100 and learning a skill that can increase your income substantially. Or better still would be saving the $100, practicing on a demo trading account and building a strategy that is proven to be profitable. Over that time, hopefully consistent contributions to a savings account specifically dedicated for your trading funds will grow to the point where you can start a small account with somewhere between the recommended $2,000 – $5,000.
Starting small requires patience and discipline, but should be viewed as a learning experience and just one stepping stone on the path to becoming a successful day trader. Remember, the journey of day trading is a continuous process of improvement, and with dedication and perseverance, traders can increase their chances of long-term success.