Learn to Day Trade: Understanding the Basics of Trading

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 Day Trading Work?

Day trading is the practice of buying and selling financial instruments within the same trading day. Traders capitalize on small price movements in highly liquid stocks or currencies. The goal is to enter and exit positions within minutes or hours, securing profits from short-term fluctuations. This approach demands constant market monitoring, as day traders must swiftly react to intra-day market movements. Drawing from years of trading and teaching experience, I’ve seen firsthand how mastering this practice requires a keen understanding of market trends and the ability to act quickly on new knowledge.

Unlike long-term investments, day trading focuses on minor market variations (taxes for traders are different than those for investors too). Traders use leverage to amplify their buying power, but this also increases potential losses. Successful day trading hinges on well-defined strategies and the discipline to stick to them, avoiding emotional decision-making that can lead to costly mistakes. The dynamic nature of day trading means it’s not for everyone, but with the right mindset and approach, it can be a lucrative endeavor.

First, familiarize yourself with the rules that govern day trading. Knowing the ins and outs of day trading regulations can save you from costly mistakes and penalties. These rules are not just bureaucratic red tape; they’re designed to protect traders from the volatility and risks inherent in the market. From pattern day trader requirements to understanding margin rules, each guideline plays a pivotal role in shaping your trading strategy. 

For a deep dive into day trading rules and how to navigate them, check out this comprehensive guide on day trading rules.

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.

Should You Start Day Trading?

Deciding to start day trading is a significant choice that hinges on personal circumstances, financial goals, and risk tolerance. Day trading is not a one-size-fits-all venture; it requires a commitment to learning, constant market analysis, and the ability to manage stress. It suits individuals who thrive in fast-paced environments and can make decisions swiftly without succumbing to emotional pressures. My journey into day trading, starting after the 2008 financial crisis, taught me that resilience and adaptability are crucial for navigating the range of the market’s highs and lows.

It’s also essential to have adequate capital. The financial markets are unforgiving to undercapitalized traders, as the costs of trading can quickly erode profits. Before diving in, ensure you have a solid foundation in market principles and a cushion to absorb potential losses without impacting your financial stability. Remember, day trading is a skill that takes time to develop. Starting with a clear plan and realistic expectations is key to building success.

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.

Day Trading vs. Swing Trading

Day trading and swing trading cater to different trading styles and time commitments. While day trading involves buying and selling securities within the same day, swing trading takes a slightly longer view, holding positions for several days or weeks to capitalize on expected upward or downward market shifts. This fundamental difference in time horizon affects the strategies and analysis methods each type of trader uses.

Swing traders have the luxury of more time to make decisions, allowing for deeper analysis and less need for rapid, high-stress choices. However, they also face overnight and weekend market risk, which day traders avoid. My experience has taught me that both approaches require discipline, but day trading demands a higher level of attentiveness and a stronger reaction to market volatility. The choice between day trading and swing trading depends on your available time, risk tolerance, and preferred trading style.

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 …

Popular Day Trading Strategies

Every successful day trader relies on a set of strategies that guide their trading decisions. These strategies are not just random guesses; they’re based on patterns, market analysis, and a deep understanding of stock movements. 

Whether you’re a beginner looking to get your feet wet or an experienced trader aiming to refine your approach, exploring different day trading strategies can significantly enhance your chances of success. From momentum trading to scalping, each strategy has its unique advantages and challenges. To explore various day trading strategies and find the one that best suits your trading style, visit day trading strategies.

Momentum Chart Patterns

Momentum trading involves identifying stocks moving significantly in one direction on high volume. Traders look for momentum chart patterns, such as breakouts or trend continuations, to enter trades in the direction of the momentum and exit when it begins to fade. This strategy relies heavily on technical analysis and real-time news to predict how stock prices will move. Over my trading career, I’ve learned that successful momentum trading requires an excellent understanding of market sentiment and the ability to act quickly on chart patterns.

Contrarian Trading Strategies

Contrarian trading goes against market trends by buying stocks that are performing poorly and selling those at their peak. This approach is based on the belief that markets overreact to news, creating opportunities for gains when the market corrects itself. 

It requires a deep understanding of market cycles and investor psychology… Not to mention the discipline to resist joining the hordes of brainless short-selling zombies!

When you short a day 1 low floater, are briefly up 2 cents a share, then blow up your account. $OCGN #riskmanagement pic.twitter.com/CYjGS41JYv

— Timothy C. Bohen 🇺🇸 (@tbohen) October 9, 2019

Contrarian Chart Patterns

Contrarian chart patterns, such as head and shoulders or double bottoms, signal potential reversals in market trends. Traders use these patterns to identify opportunities to enter the market against the prevailing trend. This strategy is challenging, as it involves predicting market turns before they happen. My trading experience underscores the importance of rigorous analysis and a disciplined approach to capitalize on these patterns without falling prey to false signals.

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.

Skills Required to be a Day Trader

Day traders must possess a combination of skills to navigate the fast-paced world of day trading effectively. These skills include critical thinking, patience, and the ability to make quick decisions under pressure. Successful day traders also exhibit independence, laser focus, and a comfort with taking calculated risks in the pursuit of profitable opportunities.

Quick Learner

Day trading is a fast-paced environment where conditions change rapidly. Being a quick learner is vital to adapt to new information and strategies effectively. The markets are constantly evolving, and traders must continuously educate themselves on new trends, technologies, and regulations. My journey has taught me that the most successful traders are those who can quickly assimilate new information and apply it to their trading strategies.

Independent Personality

Day trading requires making decisions independently, often in isolation. Traders must trust their analysis and instincts without external validation. This independence is crucial for sticking to your trading plan amid market noise. Throughout my trading career, I’ve learned the value of confidence in my decision-making process, even when it goes against the consensus.

Critical Thinking

Critical thinking allows traders to analyze information, identify patterns, and make informed decisions. It involves questioning assumptions, evaluating evidence, and considering alternative viewpoints. In trading, this skill helps in distinguishing between meaningful trends and market noise. My experience has shown that critical thinking is essential for developing and refining effective trading strategies.

Patience & Discipline

Patience and discipline are key to waiting for the right trading opportunities and sticking to a trading plan. These qualities help traders avoid impulsive decisions and minimize losses. In my years of trading, I’ve seen how impatience and lack of discipline can lead to significant losses, underscoring the importance of these traits for long-term success.

Great Computer Skills

In today’s trading world, having great computer skills is non-negotiable. Traders use sophisticated software to analyze market data, execute trades, and manage risk. Being proficient in these tools can significantly enhance trading performance. I’m a tech geek myself — my trading approach has always emphasized the importance of leveraging technology to stay ahead in the fast-paced trading environment.

Laser Focus & Quick Decision Maker

Day trading demands the ability to maintain focus for extended periods and make quick decisions based on evolving information. This skill set is crucial for reacting to market movements and executing trades efficiently. From my experience, the ability to focus intensely and decide swiftly is what separates successful day traders from the rest.

Be Comfortable Taking Risks

Day trading inherently involves risk. Being comfortable with taking calculated risks is essential for seizing trading opportunities. However, this doesn’t mean recklessness. Successful traders manage risk through stop-loss orders and position sizing. My trading career has been built on balancing risk-taking with prudent risk management strategies.

How to Select Stocks for Day Trading

Selecting the right stocks is at the heart of day trading. But with thousands of options available, how do you identify the ones with the most potential? The key lies in knowing what to look for: high volatility, liquidity, and news that could impact stock prices are all critical factors. 

Keeping an eye on stocks that meet these criteria can help you spot opportunities for quick gains. However, it’s essential to conduct thorough research and analysis before making any moves. 

For a curated list of stocks to watch that could offer promising day trading opportunities — as well as a blueprint for creating your own watchlists — check out my top stocks to watch this month.

Price-to-Earnings (P/E) Ratio

The Price-to-Earnings (P/E) ratio is a critical metric for evaluating a stock’s valuation. It compares a company’s share price to its earnings per share (EPS). Day traders often look for stocks with low or high P/E ratios based on their trading strategy. Stocks with low P/E ratios may be undervalued, presenting buying opportunities, while those with high P/E ratios might be overvalued, indicating selling or shorting opportunities. Through years of trading, I’ve learned to use the P/E ratio as a starting point for deeper analysis.

Price-to-Earnings Growth (PEG) Ratio

The Price-to-Earnings Growth (PEG) ratio builds on the P/E ratio by considering the company’s expected earnings growth. It offers a more nuanced view of a stock’s potential overvaluation or undervaluation by accounting for future earnings prospects. A lower PEG ratio suggests that a stock may be undervalued relative to its growth potential. My approach to trading emphasizes looking beyond immediate valuations to understand a stock’s growth trajectory.

Debt-to-EBITDA Ratio

The Debt-to-EBITDA ratio measures a company’s financial leverage and ability to pay off its debt. A lower ratio indicates that a company has a healthier balance sheet, which can be a positive sign for investors. In day trading, analyzing a company’s financial health is crucial for understanding its stock performance potential. Over my trading career, I’ve used this ratio to assess the financial stability of companies, aiming for informed trading decisions.

What Are the Margin Requirements for Day Traders?

Margin requirements for day traders are set by regulatory authorities and brokerages to manage the risk associated with the use of leverage. Day traders must maintain a minimum margin, often $25,000 in their brokerage accounts, to trade on margin. This requirement ensures traders have enough capital to cover potential losses. Leverage amplifies both gains and losses, making it essential for traders to understand and comply with these requirements. My experience has shown that respecting margin rules is fundamental to managing risk and protecting capital.

What Is Day Trading’s Buying Power?

Day trading’s buying power refers to the amount of capital a trader can leverage for buying securities. Typically, brokerages offer day traders leverage up to four times their maintenance margin excess. This increased buying power allows traders to take larger positions and potentially generate higher profits. However, it also increases the risk of substantial losses. Throughout my trading career, I’ve emphasized the importance of using leverage judiciously, ensuring that each trade is well within risk tolerance levels.

What Is the Success Rate of Day Traders?

The success rate of day traders varies widely, with a small percentage consistently making profits. Many enter the market with high expectations but fail due to a lack of preparation, discipline, or understanding of market dynamics. My years of trading and teaching aspiring traders have highlighted the importance of education, experience, and emotional control in achieving success. While day trading can be profitable, it requires dedication, hard work, and a willingness to learn from mistakes.

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.

Day Trading Risk Management

Effective risk management is the cornerstone of successful day trading. It involves setting stop-loss orders, managing position sizes, and never risking more than a small percentage of your trading capital on a single trade. Diversifying trades and adhering to a well-thought-out trading plan also play crucial roles in managing risk. Drawing on my extensive trading experience, I advocate for a disciplined approach to risk management, as it is vital for protecting capital and ensuring long-term trading success.

Learn To Day Trade: 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.