How to Day Trade For a Living: The Ultimate Guide

Day trading involves buying and selling financial instruments within the same trading day. The goal is to capitalize on short-term price movements for quick profits. 

Day trading successfully is hard. Only about 1–20% of day traders actually show profits. The way they do that is through the kind of preparation I’ll share with you in this guide.

So what does it take to learn how to day trade for a living? Let’s walk through the essentials of day trading for a living, from preparation to execution!

What Is Day Trading?

Day trading involves executing trades within a single trading session. You’re not holding positions overnight; you’re in and out on the same business day. I’ve seen traders, especially beginners, confuse this with swing trading or long-term investing.

Understanding market volatility is crucial; it can make or break your day trading game.

Day trading requires a short-term focus on price movements and an aim to capture quick profits. It’s a style that requires a strong charting platform and direct market access. You’re not just a spectator; you’re an active participant in the financial markets.

The Basics of Day Trading

The goal of day trading is to capitalize on small price movements in highly liquid assets like stocks, futures, and forex. It’s a strategy that requires quick decisions, a solid understanding of the markets, and a good deal of courage.

If you’re new to the trading world, day trading might seem like Wall Street wizardry, but it’s more accessible than you think. With the right tools, strategies, and mindset, anyone can venture into day trading. But remember, while the rewards can be high, so are the risks.

In my years of trading and teaching, I’ve seen many traders jump into day trading without adequate preparation. Trust me, you don’t want to be that guy. So let’s break down what you need to know.

How Does a Day Trader Get Started?

Getting started in day trading involves more than just opening an online trading account. You’ll need to understand the rules of day trading set by the U.S. Securities and Exchange Commission, choose the right brokers for day traders, and develop day trading strategies that suit your risk tolerance.

If you’re wondering how to kickstart your day trading journey, it’s not just about understanding the SEC rules or choosing brokers. You also need to know which stocks to keep an eye on. For that, you’ll need a reliable source that lists potential stocks to watch. This can give you a head start in identifying high-risk to reward setups. For a curated list of stocks that are making waves, check out our top stocks to watch this month.

Who Makes a Living by Day Trading?

Contrary to popular belief, day trading isn’t just for financial institutions and Wall Street elites. Individual day traders are making a living from the comfort of their homes, thanks to electronic trading platforms and cheaper commissions. However, the number of successful day traders is relatively low compared to those who try and fail.

I’ve trained thousands of traders, and the ones who succeed are those who treat it like a business. They’re disciplined, they’re focused, and they don’t let emotions dictate their trades.

The Solo Day Traders

Solo day traders are individuals who trade on their own, without the backing of a financial company. They rely on day trading software, algorithmic trading, and their own trading strategies to make rational decisions. The upside is the freedom and the potential earnings, but the downside is the lack of a safety net.

In my experience, solo day trading requires a unique blend of confidence and humility. You’re your own boss, but the market is always ready to teach you a lesson.

Access to a Trading Desk

Having access to a trading desk can provide you with valuable insights and faster trade execution. This is often a feature offered by brokers like Charles Schwab, who cater to more serious traders. A trading desk can give you a slight edge, especially in volatile markets.

In my trading life, I’ve found that a well-equipped trading desk can be a game-changer. It’s like having an extra set of eyes and ears on the market.

Multiple News Sources

Staying updated with multiple news sources is crucial for day trading. Market sentiment can change in the blink of an eye due to an earnings report or some other significant event. Being the first to know can give you an advantage.

I always tell my students that trading is 20% strategy and 80% information. You need to know what’s happening, and you need to know it fast.

Analytical Software

Analytical software helps traders analyze market data, recognize patterns, and make informed decisions. These tools are essential for developing and back-testing your day trading strategies to see their potential results.

In my courses, I provide content that helps traders understand how to use analytical software effectively. It’s a tool, and like any tool, its usefulness depends on the skill of the person using it.

How To Day Trade for a Living: How Does Day Trading Work?

Basically, trading is when you try to buy a stock or other financial instrument at a low price and sell it when it’s high. There are different and more complicated strategies to do this, but that’s the basic concept.

In day trading, you do it more frequently. Instead of buying a stock and holding it overnight or longer, day traders complete their trades all in the same day.

What Do Day Traders Usually Trade?

Day traders have a buffet of assets to choose from, and it’s not just limited to stocks. You can trade a variety of asset classes, from exchange-traded funds (ETFs) to commodities like crude oil and gold. The key is to align your trading choices with your day trading strategy. Whether you’re into news trading or high-frequency trading, the asset you choose should offer the liquidity and volatility you need to execute successful trades.

Always aim for assets with high liquidity; it’s easier to enter and exit trades. Scalability is vital; your strategy should be adaptable to different market conditions.

Remember, the goal is to capitalize on short-term price movements. So, pick assets that align with your strategy and trading goals. This way, you’re not just throwing darts in the dark; you’re using calculated and quick decision-making based on your trading approach.

Pros of Day Trading 

Day trading isn’t just about the freedom to set your own schedule or the potential for big earnings. It’s about leveraging your analytical skills to make rational decisions in a fast-paced environment. Here’s how to capitalize on these advantages:

Set Your Own Schedule as a Day Trader

The freedom to set your own schedule is a big plus, but it’s crucial to establish a daily routine. Use this flexibility to focus on the most volatile market hours to maximize your profits. 

Remember, discipline is key. Stick to your trading plan and avoid impulsive decisions based on short-term price fluctuations.

Trading Develops Intellect

Sure, trading sharpens your mind, but how do you make it actionable? Invest in educational resources and tools that help you analyze market trends and asset classes. Use algorithmic trading platforms to backtest your strategies and make data-driven decisions. The more you learn, the more you earn.

You Can Trade from Anywhere in the World

Trading from a beach in Bali sounds great, but ensure you have a reliable internet connection and access to real-time market data. Your location shouldn’t compromise your trade execution. Use electronic trading platforms that offer mobile access so you can trade on the go.

Trading Is a Prestigious Job

Being a successful day trader does bring prestige, but it also requires careful planning and proper risk management. Use tools like Contracts For Difference (CFDs) and Exchange-Traded Funds (ETFs) to diversify your portfolio and hedge against market risks.

You Can Make a Lot of Money Trading

The potential for significant financial gain is real, but it comes with risks. Always set aside a portion of your earnings to reinvest in your trading education or to diversify your investment into more stable asset classes. Remember, don’t put all your eggs in one basket.

Cons of Day Trading 

Day trading isn’t a walk in the park. It’s a field that tests your emotional and psychological mettle daily. Here’s how to mitigate some of these challenges:

Market Risks

Market risks like price swings and sudden price moves are inevitable. To mitigate this, employ strategies like news-based trading to capitalize on market reaction to news events. Always have a basic strategy in place and use stop-loss orders to minimize potential losses.

Complex Strategies

Contrarian investing and pairs trading are not for beginner day traders. If you’re new to these, start with a simpler strategy and work your way up. Make sure to backtest any complex strategy on a demo account before going live.

Day Traders Face Loneliness

The solitary nature of day trading can be tough. To combat this, join online trading communities or forums where you can share strategies and experiences. It’s a good way to stay updated and get different perspectives on market trends.

Markets Will Test Your Mindset Every Day

Emotional ups and downs are part and parcel of day trading. To stay grounded, make it a daily basis practice to review your trades. Identify what worked and what didn’t, and adjust your trading plan accordingly. Keep a trading journal to track your emotional responses to market events.

How To Get into Day Trading

Getting into day trading involves a combination of education, practical experience, and emotional preparation. You’ll need to understand the common commission structure, the contracts for difference, and how to manage your risks.

Day trading is a full-time commitment that requires a well-defined plan and a disciplined approach. Emotional control is critical; the market is no place for impulsive behavior.

If you’re considering this as a career, you need to prepare thoroughly. Let’s address some common questions and lay out a basic strategy for beginner day traders.

Preparation Steps

• Choose Your Trading Style: Whether you’re into news-based trading or contrarian trading, your trading style will dictate the types of stocks or assets you’ll focus on. Make sure your style aligns with your daily routine, as trading requires constant monitoring on a daily basis.
• Select a Robust Platform: Your trading platform should offer real-time data, various charting tools, and quick execution. The actual price you get can differ from your intended price, leading to worse fill prices. A good platform minimizes this distinct difference.
• Initial Capital: Know how much you’re willing to invest and what you aim to earn. Proper capital allocation is essential; you can’t trade effectively if you’re underfunded.

Core Elements for Success

• Risk Management: Proper risk management is crucial. Be aware of market session timings and how share prices can be affected by price direction and short-term price fluctuations.
• Continuous Learning: The stock market is ever-changing. Books about day trading, online courses, and mentorship programs can provide valuable insights. Keep an eye on daily news for news-based trading opportunities, and fundamental analysis for a different lens.
• Review and Adapt: Always review your trades. Whether you’re dealing with worse fill prices or the actual price, understanding where you went wrong or right will improve your skill level for future trades.

How To Day Trade for a Living: 3 Steps to Do It the Smart Way

Day trading for a living is more than just a series of stock trades; it’s a full-fledged business that requires a strategic approach. I’ve been teaching and trading long enough to know that there are smart ways to go about it. So, let’s break it down into three essential steps.

1: Start With Paper Trading

First up, paper trading. Before you risk a single dollar, simulate your trades. Use a trading simulator to get the feel of the stock market conditions and test your strategies. This is where you learn to read price action and understand the dynamics of bull markets without any financial losses. 

Even experienced day traders use simulators to test new strategies.

2: Trade With Money You Can Lose

Second, trade with money you can afford to lose. This isn’t just a cautionary tale; it’s a rule. Trading involves substantial losses and high-risk strategies. You need discretionary money, not your rent or grocery money. I’ve seen traders get wiped out because they didn’t adhere to this basic rule. Your risk parameters should be set in a way that even a series of bad trades won’t knock you out of the game.

If you’re a beginner, the likelihood of losing on trades is much higher. When you start your trading journey, only use money that you can afford to lose. Think of it as an investment … Or even the tuition you’re paying to “go to school” and learn a new skill.

If you trade with money you need for bills or basic necessities, you’re trapping yourself in a corner and setting yourself up to fail. 

3: Study, Study, Study

Lastly, never stop studying. The stock market is an ever-changing beast. Keep up with market news, understand the implications of interest rates, and always be on the lookout for the next big trading opportunity. Use tools like stock screeners and keep an eye on key price levels. The more you know, the better your trade decisions will be.

If we were to gather a bunch of successful traders in a room, we’d find that they all have at least one thing in common: They all constantly study and prepare.

But most people don’t. That’s why most traders lose.

How To Day Trade for a Living: Day Trading for Beginners

If you’re new to the game, the broad question is, can you make it as a day trader? The answer lies in your approach. Start by understanding stock market volatility and how stock price movements work. You’re not investing for the long term; you’re in and out within a trading day period.

Don’t ignore the power of a good stock scanner and technical catalysts like positive news. These tools can provide you with the trading opportunity you need to make a profitable trade.

1. Design Your Strategy

Day trading is risky, but you can potentially limit your risk with the right strategy. 

So you must understand chart patterns.

Don’t enter a trade just because a stock’s moving. Watch for the patterns that can work with your strategy. If you see a stock moving and it fits your setups, put together a trading plan.

As you get more practice and grow your skills, you’ll spot more patterns and build more strategies for trading smart.

2. Choose Your Broker

Ready to trade? First, you need an account with a stock brokerage.

There are many different brokers. Find the one that fits your needs. Not all brokers are created equal … and some are better for particular strategies.

Do your research and pick a reputable broker. Need tips? Start here. 

3. Keep a Trading Journal

It’s so important to track your trades in a journal. 

Learning to day trade feels like drinking from a fire hose at times. There’s so much to learn!

Tracking your trades will help you organize. You can better see where you need to focus so you can use your time more effectively. And you can evaluate your mistakes and then adjust.

4. Never Stop Practicing

Trading is all about execution.

With day trading, you can create the perfect trading plan … but get caught like a deer in headlights when you start trading with actual cash.

Being a skilled trader involves spotting chart patterns … and entering and exiting trades with solid timing. And when things don’t go the way you expect, you have to manage your emotions and stick to your original plan.

Nothing will replace screen time and practice when it comes to learning the process. Start small and improve a little each day. That’s how to build real trading skills.

Top Strategies To Start Day Trading for a Living

Before you get bogged down with chart patterns and advanced technical indicators for day trading, focus on the basics.

This is how you build a foundation for understanding what really works so you can learn to adapt that to any market.

Support and resistance, risk management, and time management are great starting points.

How To Day Trade for a Living Top Strategy #1: Risk Management

Risk management is one of the MOST important things when it comes to day trading.

Everyone who decides to trade a stock is taking a risk. There’s no way around that. The key is to limit the risks you take. By creating your own process and rules, you can reduce your risks so your trading plans have more chance of working out.

Some rules are out of your control — and you still need to pay attention to them! In the U.S., the Pattern Day Trader (PDT) rule is something you can’t afford to ignore… it can stop you from trading completely.

To get well-acquainted with the PDT rule, check out our comprehensive guide on day trading rules.

How To Day Trade for a Living Top Strategy #2: Time Management

There’s so much to day trading. If you’re not careful, you can get distracted and end up wasting your day, missing a great setup — or worse, losing on a trade.

Day trading takes extreme focus, so time management is key. Market analysis should be part of your daily routine; it helps you spot potential plays.

How To Day Trade for a Living Top Strategy #3: Key Levels

It’s important to be aware of key levels on a stock chart. These levels are support and resistance for price movement. Knowing these areas will come in handy when making your trading plans.

Let’s dive deeper into this concept …

Example of a Basic Trading Concept: Support and Resistance

Support and resistance are levels on a stock chart where the price either pauses or reverses direction.

When you study charts, you’ll see a stock hover around certain price levels repeatedly. Look at the Tesla Inc. (NASDAQ: TSLA) chart below…

The red line (around $640) is a support and resistance level. Notice how the price hovers around that area a lot. For some reason, the stock had difficulty breaking through that area in December. In February, it dipped back down to that level and bounced — proving that the $640 level was still a strong support area.

It’s important to keep things like this in mind when making your trading plans, no matter which strategy or setup you favor.

What Timeframe Do Day Traders Use?

Day traders typically operate on short time frames, ranging from one minute to one day. The goal is to make quick trades that capitalize on small price movements. The shorter the time frame, the less exposure to risk, but also the less room for error.

In my trading strategies, I often use a combination of different time frames to get a more comprehensive view of the market. It’s a technique that has served me well and one that I teach in my advanced courses.

How To Select Stocks for Day Trading

Choosing the right stocks is crucial for successful day trading. You’ll want to focus on stocks that are liquid, volatile, and have strong market interest. The NYSE and Nasdaq are popular choices for many day traders, but there are plenty of other options out there.

A Trader’s Guide To Earning with Day Trading

Earning with day trading is not a guarantee; it’s an opportunity. Your profits will depend on your strategies, risk management, and, to some extent, luck. While some traders make a killing, others struggle to break even.

Execution & Monitoring of Trades

Once you’re in, the real work begins. I’ve seen many retail traders fail because they ignored the basics. You need to monitor your security position constantly and adjust based on price action and actual execution price. Whether you’re trading on margin or dealing with fractional shares, every decision counts.

You’re also up against market makers and professional traders who can move prices quickly. So, your success rate depends on how well you manage each trade, from breakout trade strategies to understanding your profit vs loss ratio. Keep an eye on commission fees and potential losses, because in this high-risk strategy, both can add up quickly.

Use Proper Money Management Tactics when Placing Orders

Money management is more than just setting a stop loss. Position sizing is a crucial part of your money management strategy; it helps you manage risk effectively, and know the exact amounts of money you’re willing to lose. I’ve seen traders blow their accounts by ignoring these basic principles.

Monitor Markets and Place Trades Efficiently and Quickly

Continuous monitoring is key; the market waits for no one.

Utilize stock screeners and scanner programs to monitor markets and identify trading opportunities. I’ve always emphasized the importance of quick execution of trades to my students.

Consider Different Types of Order When Entering and Exiting Positions

Understanding the types of orders is crucial. Whether it’s a market order for quick entry or a limit order to set your price, each has its place in your trading arsenal. I’ve used a mix of these in different stock market conditions to maximize my profit potential.

Types of Orders to Consider when Day Trading for a Living

Different market conditions call for different types of orders. I’ve used stop orders to protect against losses and limit orders to capture profits. Knowing when to use each can make or break your trading day.

What Are the Margin Requirements for Day Traders?

Day trading on margin can amplify your gains but also your losses. The U.S. Securities and Exchange Commission has specific margin requirements for day traders, which you must adhere to. Failure to meet these requirements can result in a frozen account.

Should You Start Day Trading?

Deciding to become a day trader is not a decision to be taken lightly. It requires a significant investment of time, money, and emotional energy. If you’re someone who enjoys fast-paced, high-stakes environments, then day trading might be for you. But if you’re risk-averse and value stability, you might want to explore other investment avenues.

How To Day Trade for a Living: The Bottom Line

There are a ton of ways to build day trading careers… But all of them start with the basics.

Before you even think about becoming profitable, you’ll need to build a solid foundation. That’s what I help my students do every day — scanning the market, outlining trading plans, and answering any questions that come up.

You can check out the NO-COST webinar here for a closer look at how profitable traders go about preparing for the trading day!

What is your best piece of day trading advice? Let me know in the comments!

Frequently Asked Questions About Day Trading

What Percentage of Day Traders Make Money?

The harsh reality is that most retail traders lose. If you’re serious about becoming an active day trader, realize it will take a lot of work and a long time. It’s gotta be a passion for you so you’re inspired to keep learning. 

Does the Average Day Trader Make Money?

Unfortunately, no. Day trading requires dedication and skill, and most people don’t put in the time and work to make it work for them.

How Do I Become a Day Trader if I’m Starting with $100?

Becoming a day trader with only $100 is no different from starting with $1,000 … except you have to choose a broker with a lower account minimum. Once you’re ready to trade, be ready to trade small. Look for low-priced penny stocks to practice and build your account.

What Do Professional Day Traders Focus On During Business Days?

Professional day traders typically focus on day trading stocks during business days. They pay close attention to the market day to identify opportunities within a specific period of time. Understanding the rhythms of a regular business day helps these traders time their entries and exits for maximum profitability.

What’s the Difference Between Swing Traders and Day Traders in Forex Markets?

Swing traders and day traders operate in various markets, including forex markets. While swing traders look for future price movements over an extended time period, active day traders aim for quick gains within the same day.

How Do Investment Firms Relate to Proprietary Trading Firms?

Investment firms and proprietary trading firms both play roles in the financial markets but serve different functions. While investment firms typically manage assets on behalf of clients, proprietary trading firms use the firm’s capital to trade. For many, trading at such firms can become a full-time job that aligns with their trading business goals, often operating within a business day period.

What Resources Are Available for Educational Purposes?

For educational purposes, aspiring traders can participate in a trading challenge to test their skills. Engaging with real traders, senior traders, and even individual traders can provide a wealth of knowledge and experience to help you improve your strategies.

What Are Some Trade Management Techniques?

Trade management involves several components such as setting a day trade counter, selecting favorite trades, determining the fee per trade, setting a price target, and calculating minimum profit and profit loss ratio. These elements help traders manage their trades effectively for maximum profitability.

How Do You Set Trading Income Goals and Investment Plans?

Setting trading income goals is an essential part of your investment plan. To achieve these goals, traders often establish a set of trading rules or a trader rule. Considering average position size, share structure, and share rates can also be integral to an effective investment strategy.

What Tools Offer Direct Access to Popular Trading Apps?

Tools like direct access trading platforms are vital for day traders and provide connectivity to popular trading apps. Some of these platforms might even offer charting platforms and special features like Robinhood Crypto for diversified trading options.

How Does News Affect Day Trading?

News can significantly influence day trading. Extra dollars can be made by trading on positive news catalysts, while bad news can cause sharp declines, impacting traders who are not prepared for such events.

What Is Leveraged Investing and How Does It Relate to Day Trading?

In the realm of day trading, leveraged investing involves using borrowed capital to amplify potential returns. This is often accomplished by opting to trade on margin, a high-risk strategy suitable for experienced traders.

Leverage amplifies your trading power, but it also magnifies the risks involved.

What Are the Different Styles of Day Trading and How Do Brokers Fit In?

Styles of day trading can vary widely, from scalping to momentum trading. Choosing the right style can significantly impact whether you become a profitable day trader. Your trading range, or the price difference between your entry and exit, will also influence your profitability. Day trading brokers offer various fee structures, and understanding how the fee per trade becomes applicable is crucial when selecting a broker that fits your trading style.

How Do Deep Pockets and a Business Plan Relate to a Profitable Strategy?

Having deep pockets can be advantageous in day trading, allowing you to weather market volatility and execute a profitable strategy. However, a significant financial reserve is not enough; the majority of market participants who succeed also have a well-thought-out business plan. This plan should include risk management guidelines, profit targets, and an evaluation mechanism to continually refine the trading strategy.

What Makes a Successful Day Trader and How To Avoid Being an Untrained Trader?

A successful day trader often utilizes a range of methods such as technical analysis and margin trading to maximize gains. Being an untrained trader with a lack of understanding of key terms and basic rules can lead to significant losses. It’s essential to invest in comprehensive day trading education to become successful.

What Are the Best Brokerage Services for Day Trading?

For day trading, it’s important to choose online brokers or brokerage firms that provide a robust day trading platform. Brokers for day trading like Interactive Brokers and Robinhood Financial LLC offer various brokerage services including tiered trading commissions which can be crucial for active traders.

How Important Are Risk Tolerances and Investment Objectives in Day Trading?

Understanding your risk tolerances and setting clear investment objectives are crucial aspects of risk management. Working with a risk manager can help you set risk limits and establish realistic profit goals to guide your trading activity.

What Tools and Types Of Trades Are Essential for Day Trading?

Having a reliable charting platform is essential for effective technical analysis. Candlestick charts and momentum indicators are commonly used tools. Range trading is one of the many types of trades you can engage in during a single trading day.

How Do Price Trends and Market Factors Influence Day Trading?

Price trends are significant factors in trading activity. Being aware of market influences like hedge funds can provide insights into potential price movements. Computerized trading is often used to capitalize on these trends, although one must be cautious of trading illiquid assets.

What Should Beginner Traders Know About Pattern Day Trading and Setting Goals?

For beginner traders, understanding the concept of pattern day traders is essential, as it comes with specific regulations and risk ratios. Setting trading goals can help manage the risks of day trading effectively. Utilizing a limit price strategy can be a good starting point to control potential losses and gains. Understanding your risk ratio is also crucial for long-term success.

What Skills Are Required for Day Trading for a Living?

To successfully day trade for a living, you need considerable skills in areas such as market analysis, risk management, and trade execution. It’s also crucial to learn from mistakes traders commonly make, in order to avoid them. Investors who transition from long-term investing to day trading often find that the skill sets required can be quite different.

How Does Capital Affect Your Day Trading Success?

Being an undercapitalized trader can make it extremely challenging to succeed in day trading. You will need sufficient capital to purchase real stocks and manage your cost basis effectively. The amount of capital you have will often determine what kind of strategies you can employ, something that new traders should keep in mind.