Day trading means that you concentrate on short-term positions that close before the stock market closes. Those who do this are usually called day traders and have no open positions overnight.

Many people believe that day trading is good for the stock market because it serves as a lubricant for stocks, which is necessary for the stock market to be efficient.

A good example is that day traders increase market liquidity and make it easier for all traders on the exchange to find a counterparty to trade on the exchange.

Day trading is an investment method with excellent financial efficiency and risk management. The investment method called day trading has two main characteristics. The first is 'to complete buying and selling of stocks on the same day and not to carry the position over to the next day'. The other is "repeatedly buy and sell the same funds during trading hours". With these two characteristics, day trading allows you to trade with most of the risk limited to stock price fluctuations, and you can accumulate profits even with a small amount due to the efficiency of the funds.

Contrary to popular belief, day trading is an investment method that is easy for beginners to start with even a small amount of money because of its high capital efficiency and ease of risk control.

In this overview, we will present the basic knowledge required to start day trading, including its features, attractiveness and differences from other trading methods.

What do we call day trading?

Day trading, also known as intraday trading, refers to a trading strategy where a financial instrument is bought and sold on the same trading day.

In other words, intraday trading is a trading strategy where a trade is opened and closed within a trading day, or even several times within a particular day. A trade that was opened on one day and closed the next day is not considered a day trade.

Generally, day trading is a speculative trading method used by day traders and is designed to exploit small intraday price fluctuations to make large profits over time.

Day traders focus on the short-term movement of a security's price rather than its long-term potential.

Day trading does not involve 'overnight risk' because the position is not carried over to the next day, and it is possible to trade with most of the risk limited to stock price fluctuations.

"Overnight risk (carry risk)" is the risk that arises when the price of a stock is carried over to the next day. It is a downside risk that many investors face. Day trading, which completes the process from order to settlement during the trading hours of the day, has the advantage that it is not affected by internal and external economic indicators and corporate indicators announced after the close of such trading. In other words, day trading allows you to trade most of your risk by focusing only on share price movements. On the other hand, in the case of medium- and long-term investments, the longer the holding period, the greater the exposure and risk of share prices, such as interest rate and exchange rate fluctuations, as well as corporate bankruptcy risk, and domestic and foreign economic indicators.

There are different strategies for day trading:

  • Trend trading means buying when securities prices are rising or short selling when securities are falling. Trend trading is based on the assumption that prices will continue to rise or fall.
  • Scalping is a style of trading in which a trader uses small changes in price to make a profit. This strategy is implemented by quickly entering and exiting a location within a few minutes or even seconds.
  • Trading on the news occurs when a trader buys when there is positive news, or sells when there is bad news. This can lead to higher volatility and create opportunities with higher profits or losses.
  • Contrarian investing is a trading strategy in which some traders intentionally go against current market trends, buying financial instruments when others are selling and selling when most others are buying.

Day trading is a risky trading strategy. Even if a trader can accurately predict the price movements of securities, profits from price movements can be offset by transaction fees.

Day trading platform
Day trading platform

Day trader: who is he and what qualities should he have?

A day trader is a trader who completes their trade on the same day, without carrying it over to the next day.

The biggest difference between day trading and long term stock picking is the psychological aspects. If you work with day trading, the psychological pressure is concentrated in a shorter period of time than would normally be the case with traditional stock investing. The pressure leads to fear and bad or, at worst, disastrous decisions, which are immediately reflected in the account. Stock investors also act less rationally under pressure, but are often left in the dark about their real losses as it takes a relatively long time to figure out the outcome of a trade.

To be a day trader, you must have qualities such as focus, concentration, high stress tolerance, the ability to work at an extremely fast pace and not react to short-term setbacks.

Many people who want to make money in the stock market think it's easy and that all they have to do is find a strategy and then increase their positions when the profits increase and after a while you get rich. In reality, it's not that simple. It's a profession, and like any profession, you have to learn a lot. Reading a book or an article on the Internet won't make you a day trader. It requires constant self-education and gaining new knowledge in trading. The stock market and markets around the world are constantly changing, and what worked yesterday may not work today or tomorrow. Always try to stay one step ahead. There are many trading lessons and courses available, so if your goal is to learn about trading, you can easily find all the information you need. Also, if possible, try to surround yourself with experienced traders and communicate with them as much as possible.

If you want to become a successful intraday trader you will need to be well versed in technical analysis. Become familiar with the use of various indicators. Test different indicators which show price movements in new ways, and learn to analyse using the indicators you are most comfortable with. The more you review the rating charts, the easier it will be for you to see the patterns and the better your chances are that one day you will be successful.

Which markets can I trade by day trading?

There are many financial markets that offer day trading opportunities. Each market has different dynamics and it will take time to learn and understand the pros and cons of each market. Therefore, at least for a beginner, it is preferable to become familiar with the market and start trading.

Ultimately, your choice will depend on what you are comfortable with, but also on what you can afford.

The most popular day trading markets today are:

  • The foreign exchange market (Forex) is the most liquid financial market in the world and requires the least amount of capital to start trading.
  • Futures markets require more money than the currency market to open a trading position, but less than the stock market. Futures contracts buy or sell an underlying asset, such as a commodity or stock index.
  • Stock markets are more capital intensive. The deposit required to start day trading depends on the requirements of your broker.
  • Commodity markets, where commodities such as oil, precious metals and industrial metals are traded.

Day traders will not need to actually deliver the assets they trade or make cash payments when the futures contracts expire.

Online investment platform for day trading

An online broker facilitates your trades and provides you with an investment market intermediary for a fee or commission. Choose a licensed, transparent and reliable broker that charges a reasonable fee and is able and willing to help you with your trading problems. A broker will provide you with an online trading platform to conduct transactions over the internet.

Many trading platforms are available for day trading. Your broker will be sure to offer you to test the platform with a demo version. If you are not satisfied, try several others and choose the one that best suits your trading style. Remember that you can change your trading platform several times during your trading career.

The platform should definitely include charting software and a set of tools required for good day trading. In addition, the platform should be fairly easy to use, informative and updated in real time. Choose platforms with a mobile version, because it is convenient and because you will be able to make transactions anytime, anywhere with just a mobile phone.

Platform for day trading
Platform for day trading

How can I register?

Signing up is relatively easy. Whichever trading platform you choose, the procedure is almost the same: you will be asked to enter a valid email address and password that only you will know.

You will then be asked to tick the box for "Website Terms of Use and Privacy Policy". If you haven't already done so, take the time to read them before completing your registration so that you don't have to agree to anything that doesn't suit you.

Once you have entered your details you will receive an email with a link to confirm your registration - go through the standard procedure and you will be able to use the platform.

It takes 2-3 minutes to register on the platform
It takes 2-3 minutes to register on the platform

Demo account: what is it and what is it for?

A demo account, which is usually offered by a broker on the trading platform, is a type of account that a trader can use to practice trading strategies with simulated money. You should practice the strategy until you feel comfortable with it. With a demo account you can trade at any time of the day, even when the respective market is closed. It is advisable to practice for at least three months or even more before trading with your own money.

To start with, try it out in a demo account
To start with, try it out in a demo account

How do I start trading?

To trade for real, you will need to activate your live account. This is easy to do, just fund this account with the minimum amount set by the system - on the platform we are considering, this amount is only $10. Choose one of the options listed on the platform and transfer the money using your debit card or one of the payment systems offered. The money is credited instantly and you can use it immediately. Withdrawals can be made using the same methods and the minimum withdrawal amount is $2.

Real account funding options
Real account funding options

Tools for intraday trading

With the advanced trading tools offered by the trading platform, you can significantly limit your potential losses. Stop loss and take profit features help you control your risk.

With a limit order you can specify a certain buy or sell price. When this price is reached, the trade is automatically executed.

With a stop loss limit order you not only specify when the stock should be sold, but also when the price is too low to sell. This prevents you from selling your share at a low price in the event of a sudden collapse.

It is quite possible that your share will rise in value quickly. If you want your stop limit to automatically adjust and be set accordingly higher, simply set a trailing stop loss.

Secure your operations with the stop loss function
Secure your operations with the stop loss function

As mentioned above, traders use technical analysis to predict short-term market movements.

Technical analysis involves the analysis of market price patterns. When a day trader sees a clear pattern, it means that price is more likely to go one way than the other. Many patterns can be used by day traders as well as those who base their trading on a longer time frame.

Intraday traders specialising in technical analysis have trades lasting from a few seconds to a full day. Technical analysis indicators come to the rescue. Choose a platform that offers these indicators. The most commonly used indicators are trend lines, support levels, resistance levels and moving averages.

Indicators for technical analysis
Indicators for technical analysis

How to succeed in day trading?

Day trading is a risky activity. Unfortunately, no one can give you a hundred percent guarantee of success in certain activities. There are no clear instructions on how and what you should invest in, what time period you should choose and what markets you should trade. However, there are general rules which can greatly increase your chances of success. Here are some of them:

  • Your knowledge is your strength. From the start, invest in yourself by using a number of sources to broaden your knowledge of the subject. You can use sources such as media (print media, broadcast media, online platforms), books, video tutorials, blogs and forums. Also, don't be afraid to learn from your own mistakes.
  • Start-up investment amount. Never risk more than 1% of your trading balance in a single trade, which is a proven rule in day trading.
  • A reliable computer or laptop with sufficient memory and a fast processor is essential in order for you to make the most of the trading platform offered by your broker. You should also have a mobile phone with enough data to back you up in case you lose your internet connection.
  • Broker. Choose a brokerage company that provides the most suitable platform for day trading. The broker should be licensed and the platform should be functional, informative and suitable for you in terms of commissions.
  • Market knowledge. Follow the news and learn to analyse how events in the world of economics, politics, science, environment and so on affect asset prices.

Practice and hone your trading skills with a demo account, and sooner or later you will see positive results!

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