So you want to learn how to day trade?
It’s great for the right people. I LOVE the markets and have for years. In fact, I’ve built my life around it!
So for me, that means I’ve got time to hunt, fish, and camp. I have time to spend with my family.
I can tell you this: the market will never call you into work. Done for the day? Close the laptop and walk away. That means you have to be a motivated self-starter.
Trading can potentially be a lucrative undertaking — but it’s far from easy.
That said, learning how to day trade is one of the best decisions I ever made. Starting as a beginner? Read on for some tips on how to day trade.
Table of Contents
- 1 What Is Day Trading?
- 2 How to Day Trade: What You Need to Know Before You Start
- 3 Characteristics of a Day Trader
- 4 How to Day Trade: What Are the Main Challenges?
- 5 How to Day Trade: Market, Tools, and Important Rules
- 6 How to Read Day Trading Chart Patterns and Why They Are Important
- 7 How to Day Trade: How to Know When to Buy and Sell
- 8 How to Day Trade Using Basic Strategies
- 9 How to Create Your Own Strategy for Day Trading
- 10 How to Manage Risk as a Day Trader
- 11 What Are the Best Times to Day Trade?
- 12 How to Day Trade as a Beginner, Step by Step
- 13 Frequently Asked Questions About How to Day Trade
- 14 Conclusion
- 15 One Platform. One System. Every Tool
What Is Day Trading?
Let’s keep this simple!
A day trade is when you buy and sell a stock on the same trading day. You get in after the market opens. You get out before the market closes.
If you’re long biased, you buy it before you sell it. If you’re a short seller, you sell it before you buy it.
Some traders swing trade. That’s when you hold a position overnight or longer.
How to Day Trade: What You Need to Know Before You Start
Know this first: Learning how to day trade will take time.
Successful day traders take years to learn their go-to strategies. Masters make it look easy. The reality is they never stop learning. That’s crucial when the markets can change in the blink of an eye.
Day trading is a skill, like carpentry or plumbing. It can take years of study to minimize your mistakes and maximize your profits.
Should You Day Trade?
I think anyone is capable of becoming a trader. Whether you want to day trade depends on you, your goals, and more.
If you’re enthusiastic about finance, why not learn how to become a day trader? You can learn something that you can use for the rest of your life.
Characteristics of a Day Trader
Before you think about how much money you need to day trade, you need to think about who you are and your goals.
I think anyone can learn how to become a day trader. But do you have what it takes to keep trying until you get it?
Top traders are persistent. Are you good at recognizing patterns and understanding fundamentals? Can you spot trends and make connections?
Those are all part of the trading skillset. Like any skill, you can learn it.
It’s something Stephen Johnson and I have talked about many times on the SteadyTrade podcast. There’s an “it” factor that some people have where they just keep plugging away until they get it…
It’s a stick-to-it-iveness that can’t be beat down. That dogged perseverance is the most important characteristic any day trader can have.
If you think you’ve got it, join our SteadyTrade Team mentorship program to hone your skills. You’ll get access to an awesome chat room of traders, twice-daily webinars, tons of educational materials, and so much more. Learn more and sign up here!
How to Day Trade: What Are the Main Challenges?
The biggest challenge is staying in the game long enough to learn the rules. I’m talking about risk management.
You have to know when to cut losses. That’s the first and most important rule.
When you first start learning, practice cutting losses quickly. Even if you do it with paper trading.
It may sound simple, but it might surprise you how many people can’t do it. It takes practice to let go of those bad trades. Emotions can run high when money is on the table.
How to Day Trade: Market, Tools, and Important Rules
The market is a battleground. There are experts and institutions that have been trading a lot longer than you or me.
If you’re learning how to day trade stocks, you need the right tools, and you need solid rules. Let’s look at what’s key for any serious trader…
Day Trading Tools: Broker, Equipment, and Other Applications for Beginners
Which broker you use is an important decision you make as a trader. Every action you take in the market will be through your broker.
So do your research before you make a choice.
You want to find a broker that suits your strategy. Are you long biased or short biased? Do you prefer trading OTCs or listed stocks?
Once you have an idea of the strategy you’d like to try, do your research and find the broker that’s right for you.
A lot of new people are learning how to day trade on Robinhood. If you need a commission-free broker, you should know there are plenty of alternatives.
You need a good scanner. Scanners and screeners are how you find the stocks that fit your criteria.
Most brokers have scans built into their trading platforms, but nothing like what we’ve got at StocksToTrade. It’s designed by traders for traders. We’ve had over a decade to improve. We’ve got tons of features and we’re still growing.
You can try StocksToTrade for 14 days for only $7.
How to Day Trade: The Most Important Rules to Follow as a Beginner
Rule #1: Cut losses quickly.
Read that out loud over and over. Get a tattoo.
I can’t say it enough. It’s the most important rule in trading.
Remember this: the only thing you can control in the market is how much you lose. Know that you’re going to take losses. But you decide how much.
Rule #2: Have a plan before you get into every trade. When will you get in? And when will you get out if everything goes well? What will you do if everything goes wrong?
Rule #3: Stick to your plan. A plan does you no good if you don’t follow it.
How to Read Day Trading Chart Patterns and Why They Are Important
Chart patterns are a trader’s bread and butter. Understanding chart patterns is one of the keys to learning how to day trade. There’s so much you can learn from a stock’s chart, from market sentiment to trends. Learn more about how to read charts here.
How to Day Trade: How to Know When to Buy and Sell
This is where those patterns come in. Once you’ve got a firm grasp of a setup or two that you like, you can better understand when to buy and sell.
So get to know a few patterns that suit you. Learn how to spot them and plan a trade around them.
Some people like to buy breakouts. Others like to buy at support.
If you’re a short seller, there are patterns for that too. You can short breakdowns, failed spikes, and blow-off tops.
Knowing when to take profits is an art in and of itself. It’s a personal thing, but it starts with setting reasonable goals.
Tracking data can help you figure out what to expect from a setup or pattern so you can better plan entries and exits.
How to Day Trade Using Basic Strategies
I think the best strategies are the basic ones. Keep it simple. I like buying breakouts on the hottest stocks. To me, that’s why the dip and rip pattern and VWAP-Hold work so well.
In the most basic sense, you’re buying breakouts.
How to Create Your Own Strategy for Day Trading
There’s nothing new under the sun. In day trading, that can be a good thing.
Discovering something new won’t help you as a day trader … but I’m not saying do what everyone else is doing.
You’re not creating new strategies, but you’re unique. How you and I trade a strategy will be different, even on the same strategy.
Maybe you like putting in a stop-buy order right above the breakout level. Maybe you want to wait for the dip after the breakout. Once you learn the setups and patterns, you’ll begin to figure out how you like to trade them.
How to Manage Risk as a Day Trader
Never put your entire account into one position. That’s a quick way to blow up your account.
Figure out your stop loss first. Where will you get out of the trade if it goes wrong?
Take a position size that puts no more than 1% or 2% of your account at risk according to your stop loss.
Let’s say you’re going to start day trading with $1,000. Maybe you don’t want to risk more than 2%, which is $20.
You see a stock that you want to buy at $1.20, and you like $1 for your stop loss. For less than half of your account, you could take a 100-share position and risk 2% of your account.
If the plan doesn’t play out in your favor, and you wait for your stop to get hit, you lose 2%. You can do that 50 times.
If everything goes wrong, you still have over half of your account. In theory, of course.
What Are the Best Times to Day Trade?
The morning and the afternoon are the most volatile times in the market, which can mean more volume and action. That can be awesome for prepared traders.
I don’t recommend beginners trade premarket or after hours.
When I trade in the morning, I wait until after 9:45 a.m. Eastern. It’s hard to predict what a stock will do at the bell. I like to wait and let the stock establish a trend.
I often say, “Amateurs open the market. Pros close it.”
You want to know how to be a successful day trader? You have to do what successful day traders do.
As for me, I like trading in the afternoon. Lunch hours are between noon and 2 p.m. Eastern. That’s midday trading, and it tends to be slower. Strong stocks start to run and can break out once traders come back from lunch.
How to Day Trade as a Beginner, Step by Step
I’ve linked a lot of articles in this post. That’s because they’re great resources that can help you in your day trading journey.
I know it’s a lot, but it’s the tip of the iceberg. Let’s put it all together…
Step #1: Find Your Setup
Take a look through the setups and strategies to see what calls out to you. If a setup makes sense to you, give it a shot!
Take a deeper look at it. Check out the nuances. Read about how and why it works.
Step #2: Make Your Plans
You’ve got the setup you like. It’s time to put it into action. Look for the top percent gainers every day.
I do a premarket briefing every day at 8:30 a.m. Eastern. Tune in and see what stocks I’m talking about. Plus, I answer questions and help people think through their trading plans. And I do it all for no cost!
Once you know which stocks are in play, watch for your setup.
Step #3: Paper Trade and Track Your Progress
I assume you already have a broker. (Check out the links above if you need help there.) If not, that’s OK…
You can paper trade. With paper trading, you can try out your setup risk free. You’ll get a real-time feel for what it’s like to trade. Then when you’re ready, you can start trading with your real account using small positions.
Track every trader to measure your success with your pattern. Find out if it actually works the way you think it should.
Step #4: Practice and Tweak
You’ve got your setup and your broker. Paper trading is going well.
It’s time to take it to the next level. Wait for the signal that you like and take the trade. You may not be successful right away. Don’t let a little adversity discourage you. Keep practicing your setup. Every situation is different.
You can always look for other setups if something just isn’t working.
Step #5: Stick With It
This is the most important step: You’ve got to keep at it. You didn’t learn to walk or talk in a day.
Learning how to day trade is a lifelong pursuit. I’ve been at it for more than a decade, and I’m still surprised day after day. But I love trading and the markets. That passion keeps me going day after day.
Frequently Asked Questions About How to Day Trade
Let’s tackle some of the most common questions I get about trading…
How Can I Teach Myself to Day Trade?
Sure, but no one’s an island, even me. I was lucky enough to have a mentor when I got serious about day trading.
If you want to learn on your own, you can. But learning from those who have gone before you can help you reduce your learning curve. If you already know some of the biggest mistakes, you don’t have to make them.
But if you’re not ready to commit to a mentor, there’s still plenty to study. Every week I put out new trading videos on YouTube. That’s a no-cost resource to help you get up to speed.
Can You Start Day Trading With $100?
People often ask me, “How much money do you need to day trade?”
It depends. You need enough put away or coming in that you don’t have to worry about what’s in your trading account. You want trading to be as stress free as possible. Only trade with money you can afford to lose.
I won’t say trading with $100 is impossible, but think about it what kind of stocks you’d be trading.
Switch your focus and study while you save money. Paper trade until you’re ready for the real deal.
Do Day Traders Get Rich?
Not overnight. And some never do. Most traders fail.
You’ve got to do what the best traders do: Take your education seriously and invest in yourself.
Why Do Day Traders Fail?
Usually, because they’re not serious about the skill.
It’s important to study and learn. Taking massive, unnecessary risks can get you into big trouble. Going all in and using leverage can take you out of the game fast.
You can be profitable by taking small positions and small profits as long as you work hard to manage your risk.
If you get too cocky, you can bet big and lose your hat. Learn and practice good habits. Always stick to your plan.
Learning how to day trade is one of the best things that ever happened to me. And now I love helping people understand the markets and trading, too.
If you have what it takes, it can be so rewarding — beyond just the money. But it’s not easy.
Join the SteadyTrade Team if you’re ready to level up your education.
And if you want the right tools for the job, I think you can’t go wrong with StocksToTrade (yep, I’m totally biased). You can try StocksToTrade for 14 days for only $7.
What got you interested in learning how to day trade? What inspires you to keep going when the going gets tough? Let me know in the comments below!
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