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Stock day trading — The basics and how to get started

A stock day trade is when you buy/sell a stock and then sell or buy it back before the market closes. Day traders trade considerably more than swing or position traders, so keeping costs and risk low is crucial to buying and selling profitably.

In this article

    Key takeaways

    • Stock day trading may only be lucrative long-term if traders take it seriously and do their homework.
    • Day traders must be careful, focused, and emotionally detached.
    • Stock day traders frequently consider liquidity, volatility, and volume when determining which stocks to buy or sell.
    • Stock day traders employ fundamental (news, earnings reports) and technical analysis (candlestick chart patterns, trendlines, triangles, and volume indicators) to determine entry and exit points.
    • Technical analysis of price movements is frequently used to guide day trading, which involves a high level of self-discipline and impartiality.
    • Stock day trading is as risky as any other trading technique, but it all comes down to your knowledge and discipline.

    Why day trade stocks?

    Stocks can often exhibit a lot of intraday price fluctuation and high trading volumes, providing many short-term trading opportunities every day. While these sorts of securities may also be appealing to swing traders and investors, day traders are primarily concerned with intraday price activity. 

    Some day traders look for stocks that are range bound, while others prefer equities that are moving in a defined trend. Some people want a lot of volatility and significant price fluctuations, while others don't. Day traders can select stocks that suit their trading strategy based on their preferences.

    What types of stocks are the best for day trading?

    Depending on their preferences, day traders may consider different factors while selecting stocks to trade. Key factors include volatility, volume, technical levels, upcoming earnings announcements, and market sentiment.


    Sudden price fluctuations may attract short-term traders looking to capitalise from those price swings. If a stock is volatile, it is likely to remain volatile as long as people trade it. Day traders might focus on stocks that move a lot in a single day or on stocks that move a lot most days.

    While volatility might be seen adversely by day traders, from another perspective, they can benefit from trading numerous times each day as short-term patterns emerge.

    If a stock has limited price fluctuations, there is less trading potential since the difference between the entry and exit prices is likely to be insignificant. Entry and exit points may be further apart for a volatile stock, providing more room for opportunity.

    Volume and liquidity

    High trading volumes and subsequent liquidity allow day traders to easily enter and exit trades in a single day. Higher volume usually means a tighter spread, which is also helpful for day traders. As a result, day traders often focus on equities that frequently trade multiple millions of shares daily.

    Volume spikes can be used to identify stocks that are receiving a lot of attention. Day traders keep an eye on these stocks since the higher activity may present opportunities to get in and out quickly. Volatility and high trading volume are frequently observed simultaneously.

    Setups for technical analysis

    Technical analysis setups can help day traders decide what to trade and when. For example, if a stock’s price approaches a support level, it may offer a buying opportunity if it rebounds off of it or a short trade if it breaks below that support. Similarly, a resistance level may present a shorting or buying opportunity.

    Day traders may search for chart patterns such as ranges/rectangles, head and shoulders patterns, trend channels, triangles, or wedges, to mention a few. Price action and other technical indicators may provide trading opportunities.

    Earnings Reporting

    Stocks are notoriously volatile following an earnings report. The four days each year when a business declares earnings are the busiest trading days for many equities.

    Day traders may try to trade the announcement's aftermath. Whether profits are higher or lower than expected by analysts may give some insight into the stock's consequent price direction. However, this should not be the only factor since some traders are comfortable taking positions on rumours too. 

    Trading before the announcement is risky since the price may gap after the news. It is conceivable that the price will gap through a stop-loss, resulting in a larger loss than expected.

    As a result, day traders often enter at least a few minutes after earnings are announced. That is when the spread begins to narrow again, but there will still be a lot of volatility and trading opportunities over the next several hours.

    Interest in trading/social media buzz

    Active day trading stocks can generate a lot of social media discussion. Examples include so-called meme stocks such as GameStop and AMC Entertainment.

    Google Trends also gives statistics on online searches, which can help identify companies that are attracting the most attention and, as a result, may be worth considering for day trading.

    Remember that high interest in a particular stock might be a negative indication. Research has found that a high number of online searches in Google Trends for a specific stock can often coincide with at least a short-term top in the stock price.

    Stock trading strategies for the day

    Day traders can utilise a variety of tactics to profit from short-term price changes, including:

    • Range trading entails using recognised lines of support and resistance as entry and exit points while exploiting modest price movements.
    • Volume trading is finding a stock that is experiencing a surge in volume and entering a position until the volume decreases.
    • High-frequency trading uses computer algorithms to make massive orders to capitalise on market fluctuations swiftly.
    • News trading strategy capitalises on the volatility surrounding political, economic, and business announcements on any given day.

    Day trading tactics apply to many asset classes, not just equities.

    Stock day trading risks

    Many day traders trade on margin. Margin is effectively a loan to the trader from their broker, and the broker decides whether to offer margin facilities to any particular trader. Trading on margin increases a trader’s leverage. While this can magnify profits, it equally raises the risk of suffering larger losses.

    In conclusion: margin trading carries more risk, including the possibility of loss, and is not appropriate for all traders. Before margin trading, please consider your financial situation and risk tolerance.

    How can aspiring day traders develop a successful trading strategy?

    The art of stock day trading is a proper skill. Like any other skill, it takes time, knowledge, and discipline. However, the ideas and approaches discussed above may assist you in developing a potentially lucrative day trading plan. Day traders contribute significantly to market efficiency and liquidity. 

    You must educate yourself, discover a system that you are comfortable with and can regularly apply, follow rigorous risk management, and be prepared for the inevitable ups and downs that all traders endure.

    People also ask

    Is day trading suitable for beginners?

    According to the research, the majority of day traders will lose money when they start out. However, as you gain experience, your odds of success improve. To learn the ropes, test techniques, and apply the ideas above. New traders should trade accounts on demo before moving to live accounts.

    Is it better to use technical or fundamental analysis for day trading?

    For day trading, technical analysis may be more suited. This is because it can assist a trader in identifying the short-term trading patterns and trends required for day trading.

    Because it focuses on valuation, fundamental analysis is more suited for long-term investing. The gap between an asset's current price and its intrinsic value, as estimated by fundamental research, might extend for months, if not years.

    However, day traders should monitor market reaction to market fundamentals for trading opportunities that may be supported by technical analysis.

    Why is it so difficult to make consistent money from day trading?

    Making consistent money from day trading necessitates diverse abilities and traits, including knowledge, experience, discipline, mental strength, and trading ability.

    Beginners may find it difficult to apply simple techniques that can help in minimising losses or giving them the confidence to let their winners run. Furthermore, maintaining one's trading discipline in the face of adversities like excessive market volatility or following an unexpected loss is tough.

    Finally, day trading pits you against millions of market professionals with access to cutting-edge technology, a lot of knowledge and skill, and much higher levels of trading capital.

    How much capital do I need to begin day trading?

    This is entirely dependent on your objectives. To begin, consider how much discretionary money you have to trade with, that is, money you can afford to lose. What are your trading income objectives? You may then utilise percentages of your risk capital to set profit targets and risk criteria for your trading.

    How many people are successful in day trading stocks?

    Day trading can be high risk, especially when done without strict risk management, and trading discipline. It is possible to make consistent profits over a short timeframe, but it is also possible for a string of losing trades to quickly erode your trading capital. If you're interested in day trading, study everything you can about the stock market and ensure you don't invest what you cannot afford to lose.

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