Day Trading
Day trading refers to the shortest time frame used in trading. Trades may last a few minutes to a few hours. This form of trading requires near full-time attention to the markets.
Day Trading Basics
:max_bytes(150000):strip_icc():format(webp)/INV_PickingStocksWhileDayTrading_GettyImages-1300319669-4f0c9a8b44354c12870c6fefdff2b659.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-923217650-21df90b5c6fe4d96acf3fe83422cf5c4.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1179580531-4340ea9cb05f4158b56b2e9dd3b6f8ea.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-699098011-793148ad63904565b2779ac7aaf93d53.jpg)
:max_bytes(150000):strip_icc():format(webp)/flash-trading-5bfc2d6a46e0fb00265c42d3.jpg)
Frequently Asked Questions
-
How do I start day trading?
Start by knowing what you're getting into: risk tolerance, goals, capital, as well as time and effort involved. Practice using a simulator, and start small. Research and pick a brokerage platform and set up an account. Create your trading plan, which you will review and edit at the beginning of each day as you create your watchlist for that day. Follow your plan and review your trades at the end of the day.
Learn More: How to Become a Day Trader -
Is day trading legal?
Day trading is neither illegal nor unethical. However, it is extremely complex and should only be tackled by experienced professionals. Most traders do not have the time, money, or knowledge required to sustain the discipline required to be successful.
Learn More: The Perfect Moving Averages for Day Traders -
How do you make money day trading?
The financial media has widely speculated that 95% of day traders lose money, and many of that 95% continue to trade for a time despite being unprofitable. Those who do make money, succeed at predicting a stock's movements through rigorous research and a pinch of luck from time to time.
Learn More: Day Trading Rules for Rookies -
What's the difference between day trading and forex trading?
Forex trading (foreign currency trading) can follow the same time frames as day trading, meaning it can be done in short bursts on a daily basis. But trading sessions for stocks are limited to exchange hours, generally 9:30 a.m. to 4 p.m. EST, Monday through Friday with the exception of market holidays. The forex market, on the other hand, remains active round-the-clock from 5 p.m. Sunday, through 5 p.m. EST Friday.
Learn More: News Trader -
Is day trading gambling?
Day trading can closely resemble gambling. For instance, when you place a day trade, you're betting that the price movements of a particular stock will go in a particular direction in the short term. If a person trades only for the emotional rush of winning and without the logical detachment offered by rigorous research, they are likely gambling. Traders driven by emotion may fail to recognize a losing bet and exit their positions.
Learn More: Only Take a Trade if it Passes These 5 Steps
Key Terms
- Day Trader
Day traders execute intraday strategies to profit off short-lived price changes for a given asset. These professionals employ a wide variety of techniques and are often characterized by technical analysis. It requires a high degree of self-discipline and objectivity and comes with a high level of risk and volatility.
- Pattern Day Trader
A pattern day trader (PDT) is a regulatory designation for investors that execute four or more day trades over five business days using a margin account. During that five-day window, the number of day trades must constitute more than 6% of the margin account's total trade activity. If this occurs, the account will be flagged as a PDT by their broker, placing certain restrictions on further trading. Pattern day traders are required to hold $25,000 in their margin accounts.
- Intraday
Intraday means "within the day". It is shorthand for securities that trade on the markets during regular business hours. Day traders pay close attention to price movements, timing trades in an attempt to benefit from the short-term price fluctuations. Scalping, range trading, and news-based trading are types of intraday strategies used by traders.
- Level II
Level II is a subscription service from Nasdaq that provides real-time access to the Nasdaq order book and gives investors market depth and momentum statistics. It offers price quotes from market makers registered in every Nasdaq listed and OTC Bulletin Board security.
- Stag
A stag is a term for a short-term speculator, also known as a day trader, who tries to profit from quick price movements. These traders require significant capital, high risk tolerance, lots of research, and attention to detail.
- Guerrilla Trading
Guerilla trading is a short-term trading technique that hopes to generate fast profits with little risk. This is accomplished by repeating small transactions multiple times during one session. It resembles scalping but moves much faster. This technique demands considerable experience to be successful.
:max_bytes(150000):strip_icc():format(webp)/intraday.asp-final-3093697bb942489d90b3a144952cb607.png)
:max_bytes(150000):strip_icc():format(webp)/Patterndaytrader-1af2dcedc8fd4f0bac9a8194f300f26d.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1169706295-50a977e8beb54a329327c2cfb3514e68.jpg)
:max_bytes(150000):strip_icc():format(webp)/97061232-5bfc2dcc46e0fb00260b8ee9.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-998260642-0efe15f9e4e94ab1bed28d1b693d943d.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1300319535-61eb93acfaae490fb3fbd95001b1c9bf.jpg)
:max_bytes(150000):strip_icc():format(webp)/active_trading_traders-5bfc476d46e0fb00261171a3.jpg)
:max_bytes(150000):strip_icc():format(webp)/DayTradersRetailvs.PropTradingAccounts-8d1e92d96fd94e2f8b7316247049b410.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-801479766-479aa3469402477682c420333e21d706.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1821924246-c2c6cc57147944afba725afbf748a2e7.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-485109234-f8f18cebcd3147b39d7e2a61363524e7.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1899278152-70efb1298f674d7d883855110e06c254.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-56518443-04bdab5c029548abb3bf646fa684d4c3.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1387979338-c96ea0ba33ef497092d80c39f3474c3c.jpg)
:max_bytes(150000):strip_icc():format(webp)/aa010876-5bfc2b9cc9e77c005143f33c.jpg)
:max_bytes(150000):strip_icc():format(webp)/96303186-5bfc2dcc46e0fb00517c5034.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-2050811541-5d6f8f0d97e140a5aa4f283ae5a863f6.jpg)
:max_bytes(150000):strip_icc():format(webp)/shutterstock_253136563-5bfc2b98c9e77c00519aa7a8.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1064145406-4cc8495ae3b04254b8be9411d1fcaa9b.jpg)
:max_bytes(150000):strip_icc():format(webp)/122574802-5bfc2b8d46e0fb0026016ef5.jpg)
:max_bytes(150000):strip_icc():format(webp)/investing8-5bfc2b8d46e0fb005144dbe3.jpg)
:max_bytes(150000):strip_icc():format(webp)/thinkstockphotos-494677429-5bfc34b7c9e77c0026b6b690.jpg)
:max_bytes(150000):strip_icc():format(webp)/revolver-c487c90df3274092980db04b210e3555.jpg)
:max_bytes(150000):strip_icc():format(webp)/shutterstock_240496726-5bfc360bc9e77c005181bc20.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1744456994-543ea1e7135d47988e81379ecebdaa2b.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-880033482-0f86c269e219465aa4d375dc1ea3a8fb.jpg)
:max_bytes(150000):strip_icc():format(webp)/activetrading18-5bfc2b9a46e0fb005119b443.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1128046391-c235a87125ba426cbffdd0e211568514.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-186493996-584be16103e04e23b5d4b7055c5bdc99.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1225575976-7c74836e96ab432e8623fe3923af0c7b.jpg)
:max_bytes(150000):strip_icc():format(webp)/96254593-5bfc388546e0fb00260eb5a0.jpg)
:max_bytes(150000):strip_icc():format(webp)/Primary-Image-best-swing-trading-platforms-2023-7485679-4c3fb7dca1f84ea7a377d8396d0096b0.jpg)
:max_bytes(150000):strip_icc():format(webp)/stocks-lrg-4-5bfc2b1dc9e77c00517fbe69.jpg)
:max_bytes(150000):strip_icc():format(webp)/volume_thinkstock_512694725-5bfc2fec46e0fb005145a36c.jpg)
:max_bytes(150000):strip_icc():format(webp)/cropped-image-of-man-checking-stock-market-on-mobile-phone-1051266664-0cefdf912d014106bc5338cda5999f31.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-699097873-bc9b1c629c91456eacbb2c33b38ab643.jpg)
:max_bytes(150000):strip_icc():format(webp)/GettyImages-1333890806-3fc8eba160e043708ce9a50df6d578f8.jpg)
:max_bytes(150000):strip_icc():format(webp)/onlinetradingacademy-5bfc36de4cedfd0026c3b7ba.jpg)