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So, you want to learn how to day trade? This guide will give you everything you need to start day trading. So whether you are just starting or are looking for a refresher course, this guide has something for everyone!

Table of Contents

  • Day Trading Terminology
  • What is Day Trading
  • How Do Day Traders Make Money
  • Day Trading Strategies
  • Pattern Day Trader Rule
  • Psychology of PDT
  • PDT Workarounds
  • The Right Tools to Start Day Trading
  • Choosing The Right Stocks
  • Day Trading Rules: Recipe For A Good Day Trade
  • Day Trading Tips
  • Get Started Day Trading
  • How Much Money Do I Need?
  • Popular Day Trading Strategies
  • How Much Money Can Day Traders Make?

 

 

Definitions You Need to Know Before You Start

Buying stock – purchasing a share of ownership in a public company. When you buy a stock, you become a part-owner in the company and may be entitled to dividends (a payment made by the company to its shareholders) and voting rights.

Shorting stock – the sale of a borrowed security, with the expectation of buying it back at a lower price and thus profiting from the difference. When you short a stock, you hope the price will go down so you can buy it back at a lower price and give the shares back to the person who lent them to you.

Technical analysis – analyzing a security’s price movement to identify patterns and predict future trends. This is done through the study of charts and indicators.

Charts – a visual representation of a security’s price movement over time.

Indicators – mathematical formulas used to measure a security’s volatility, momentum, and trend.

Volume – the number of shares or contracts that change hands during a given period. It is used to measure the activity of a security and is often considered an essential indicator of market strength or weakness.

Volatility – a measure of how much a security’s price changes over time. It is calculated by taking the standard deviation of the security’s price movement. Volatility is often considered an essential indicator of a security’s risk. It’s the heartbeat of the stock market.

Leverage – the practice of borrowing money from the broker to trade.

Margin – the amount of money you must maintain in your account to keep your positions open. For example, if you have a margin requirement of $2,000 and use $1,000 of borrowed money, you would only have $1,000 left in your account. If the market moves against your position, you could lose more than your original investment. This is why it is essential to use caution when using leverage and only use what you can afford to lose.

Define Day Trading

Day trading – the process of buying and selling securities within the same trading day. This is done to take advantage of small price movements and volatility.

For example, if a trader buys a security at 10 am and sells it at 11 am, that would be considered a day trade.

Day trading aims to make money daily in the shortest period. This can be done by buying low and selling high or taking advantage of market conditions to make a profit.

Some day traders also use leverage, which is the practice of borrowing money to trade, to attempt to maximize their profits. Leverage is a double-edged sword. While it can increase your profit, it can double, triple, or even 10x your losses depending on how much your broker will give you.

How Do Day Traders Make Money

Day traders are always on the lookout for any opportunity that might present itself to make more money. This means they have high expectations regarding trading stocks, as volatility (or price movements) is necessary if you want an edge over other investors who don’t constantly manage risk as day traders do.

Day trading can be profitable for those who are diligent in their research and understand how to manage risk. Realistic expectations are also essential, as day trading does not always result in winning trades.

Day Trading Strategies

There are several different strategies that day traders use to find and take advantage of these opportunities. Some common strategies include:

Scalping – taking small profits on many trades throughout the day. This strategy is often used by those who want to make a living day trading.

Swing trading – holding a position for a few days or longer to take advantage of more significant price movements.

Momentum trading – entering a trade when the market is moving in a specific direction and selling when the momentum shifts.

News trading – buying or selling based on news releases that can cause significant price movements.

 

The most important thing to remember when using any of these strategies is that day trading is a risky business. It’s essential always to use caution and never risk more than you can afford to lose.

Pattern Day Trader Rule (PDT)

The Pattern Day Trader Rule is a regulation set by the SEC that requires investors who engage in pattern day trading to maintain a minimum account balance of $25,000. This rule was implemented to protect investors from incurring too much risk by using leverage.

Pattern day trading occurs when an investor buys and sells the same security(s) on the same day more than three times in a rolling five-day period. This can be done by buying and selling the same security multiple times or buying and selling different securities within the same day.

The Pattern Day Trader Rule applies to anyone who engages in pattern day trading, regardless of whether they use leverage or not. If you trade four times in one day, you will be considered a pattern day trader and must meet the $25,000 minimum account balance requirement.

There are some exceptions to the Pattern Day Trader Rule. For example, if you are a registered broker or dealer or engaged in short-term hedging transactions, you are exempt from this rule.

The Pattern Day Trader Rule is important to remember if you consider starting a day trading career. It is a thorn in the side of success and isn’t going away.

Psychology of PDT

Many day traders fail because they lack the discipline required to day trade while under PDT. The SEC will claim the PDT rule is in place to “protect” retail traders. The opposite has been proven time and again.

Traders will become frustrated with their limitations in this so-called “free market” and start to make irrational and emotional decisions. This always leads to significant losses proving that the PDT rule is primarily in place to prevent retail traders from being able to beat Wall Street.

Consider what happened in 2020 and 2021 with Wall Street Bets on Reddit. They could influence stock prices higher and higher on stocks with high short interest. This forced Wall Street to open investigations to attempt to reprimand some of the biggest influencers. Why? Wall Street lost a boatload of money because retail found a loophole and proved that the markets aren’t so “free” after all. For once, retail could walk away with a win, a small victory in a war battle.

Unless you have a high net worth, the PDT rule will be something always looming if you consider starting a day trading career. We have some workarounds for you, though!

PDT Workarounds

  1. Open multiple accounts – Let’s say you have $5000. You could open two accounts with $2500 (this gets you margin so you can go short) in each account. Now, you have three day trades in each account. When you run out of day trades in one, you start trading in the other.
  2. Cash account – This is a new account type with most brokerages. It is non-margin, so you can’t go short or use leverage, but you get unlimited day trades!
  3. Use a foreign brokerage – TradeZero International is one of the most popular, and MIC members get a special discount. They give you unlimited trades with leverage. There’s a catch, though. You can’t be a US citizen.
  4. Marry someone outside the US and get citizenship in that country – We’re just kidding. Don’t do that…unless you love them and they are aware of your existence and consent to this arrangement. Then open a brokerage account with them and get busy, PDT-free.

 

So, let us recap what we discussed.

  1. Day trading aims to make money daily in the shortest period. This can be done by buying low and selling high or taking advantage of market conditions to make a profit.
  2. Leverage is a double-edged sword. While it can increase your profit, it can double, triple, or even 10x your losses depending on how much your broker will give you.
  3. The Pattern Day Trader Rule applies to any US citizen who engages in pattern day trading, regardless of whether they use leverage or not. If you trade four times in one day, you will be considered a pattern day trader and must meet the $25,000 minimum account balance requirement.
  4. The psychological effects of the PDT rule can lead to many traders failing because they lack the discipline required to day trade while under PDT.
  5. Workarounds are available for those who want to start a day trading career despite being under the PDT rule.

The Right Tools to Get The Job Done

  1. Charting platform
  2. Scanner
  3. Good broker

Charting Platform

When it comes to charting platforms, we have some favorites for you.

First, we recommend DAS Trader Pro. It is our top pick for experienced traders. It is the fastest on the market and provides the best information.

Next, we love Thinkorswim by TD Ameritrade. Its user-friendly design and helpful tutorials are perfect for beginner day traders. Thinkorswim also offers various indicators and analytical tools to help you make the most of your trades.

If you want to see all of our top picks, you can check those out here.

Scanner

Many places will tell you that you need a paid scanner. You don’t. Most charting platforms have decent scanners built-in for free. This is an unnecessary expense.

If you are a MIC member, you get access to see mentors’ watchlists with their complete trading plans during the premarket. So, we do all the scanning work for you and save you that expense.

Good Broker

There are many things to consider when choosing the right broker, such as executions, commissions, platforms, and customer service. This is a lot to consider as a beginner. So, we have done most of the work for you.

We have exclusive broker relationships for MIC members that give special discounts.

Here are the brokers we use:

  • Successtrader – Successtrader requires a minimum deposit of $30,000. We recommend a deposit of $35,000 to create some padding for yourself if you can afford it. You will use DAS Trader Pro, one of our top-scored charting platforms, to submit orders and much more. There is a built-in scanner. So, that removes that expense.
  • TradeZero, US & Int’l. – TradeZero is who we recommend for anyone that doesn’t have at least $30,000 to day trade. You will be using TraderZero’s platform to submit your orders. It has charting, but you can use one of our other top-scored charting platforms. There is also a built-in scanner.

Choosing The Right Stocks

When it comes to stock selection, there are a few things you need to keep in mind.

  1. You want to select stocks that have the potential to move a lot in price.
  2. Look for high-volume stocks with good liquidity.

Day traders will often look to trade penny stocks because they offer high volatility and the opportunity for significant gains. A penny stock is a type of stock that is valued at less than $5 per share. These risky investments are more profitable than blue chip companies but also much riskier, so there’s a thin line between success and failure regarding how much you win or lose in one day trading session on these small-cap plays!

 

Day Trading Rules: The Recipe For A Good Day Trade

There are several different rules that day traders must follow to be successful. These include:

  1. Only trade with money you can afford to lose
  2. Set a stop-loss order
  3. Don’t overtrade
  4. Use limit orders
  5. Take your profits
  6. Have discipline
  7. Manage your risk
  8. Be patient
  9. Stay informed
  10. Have a plan

By following these rules, day traders can increase their chances of a profitable trade and avoid some costly mistakes.

Day Trading Tips

In addition to following the rules, several tips can help day traders be more successful. These include:

  1. Do your homework – Before you start trading, it’s essential to do your research. This means learning about the different stocks, markets, and strategies.
  2. Find a mentor – A mentor can teach you the ropes and help you avoid making costly mistakes. Watch our free 1-hour training webinar to learn our strategies and get mentored by the mentors of MIC.
  3. Start small – When you’re first starting, it’s best to trade with small amounts of money. This will allow you to get a feel for the market and its workings without risking too much capital.
  4. Use a practice account – A practice account is a great way to test different strategies and see what works for you.
  5. Have a plan – A trading plan will help you make decisions when you’re in the heat of the moment.
  6. Be patient – Don’t expect to get rich quickly. It takes time and practice to be a successful day trader.
  7. Manage your emotions – When trading, keeping your emotions in check is essential. This includes things like greed, fear, and hope.
  8. Stay disciplined – It’s essential to stick to your plan and not let your emotions get the best of you.
  9. Take breaks – Taking breaks from trading from time to time is essential. This will help you avoid burnout and make better decisions when you are trading.
  10. Have fun – Remember that day trading is a job and can also be enjoyable. Find what works for you and stick with it.

By following these tips, day traders can improve their chances of success.

So, here is where you should be at this point:

  1. Understand the day trading terminology
  2. Chose a strategy that made the most sense to you
  3. Chose a broker, opened an account, and funded your account
  4. Wrote down the recipe for a good day trade
  5. Chose a mentor

MIC is the perfect mentor choice because verified millionaire traders will mentor you and cut your learning curve in half. Watch the free 1-hour webinar to get started today and choose your mentor.

Get Started Day Trading

Paper trading is a great way to learn the ropes of day trading without risking your hard-earned money. It’s also an excellent way to test different strategies and see what works for you.

Then, when you feel ready, start small with real money in your account and be patient as you continue to learn and grow as a day trader.

You can access a free paper trading simulator for DAS Trader Pro for two weeks here. We recommend DAS Trader Pro Simulator because it is the most realistic.

How Much Money Do I Need?

This is a very personal question and should be carefully considered. Only use the amount of money you can afford to lose. For example, when considering how much money to deposit, ask yourself, “could I afford to lose this entire sum?” If the answer is no, reduce it to an amount, you are comfortable losing.

Here is a free webinar where we discussed this exact topic:

Popular Day Trading Strategies

A number of different day trading strategies can be used to make profits. One of the most popular strategies here at MIC is the First Red Day short.

Here is a video explaining exactly how it works for $AMC:

If you want to learn our entire library of strategies we use to make millions in the market every year, attend this free 1-hour webinar happening now.

How Much Money Can Day Traders Make?

Day traders can make a lot of money if they are successful, but the amount of money depends on several factors, including their strategy and how much risk they are willing to take.

Day traders who use sound strategies and manage their risk appropriately can make a good living. However, there is no guarantee of success, and it is possible to lose money trading stocks.

It’s important to remember that day trading is a job and should be treated as such. You will likely be unsuccessful if you’re not prepared to put in the time and effort required.

Here is a video about how much money you can make as a day trader:

Alex has made $1,440,721.74 so far this year in 2022. You can learn exactly how he did by attending this free 1-hour webinar.

Bottom Line

Day trading can be a lucrative career, but it’s not for everyone. Doing your research and developing a strategy that works for you is essential. Day traders must also follow specific rules and manage their risk. Following these tips can increase your chances of success as a day trader.

What’s Next?

If you’re interested in learning about day trading, attend our free 1-hour webinar. We’ll teach you about some of our most profitable strategies. You’ll also learn how we can help you start your trading journey.

About the Author
113 posts
Joe Kelly

Joe Kelly is a versatile entrepreneur with a passion for day trading, product design, and real estate investing. As the creator of My Investing Club's flagship course, the Day Trading Jumpstart Accelerator, Joe has made a name for himself in the financial world since he began trading the market in 2015. Specializing in options, large cap day trading, and swing trading, Joe possesses a wealth of knowledge and experience in small cap stocks, which was his primary focus for the first five years of his trading career. This expertise has led him to mentor countless individuals, sharing his insights and strategies for success. When Joe is not busy making strides in the financial sphere, he can be found cooking up some of the most delectable steaks and smoking mouth-watering, Texas-style BBQ. A man of many talents, Joe enjoys playing guitar and woodworking in his spare time. Family and outdoor activities play a significant role in Joe's life. He loves spending quality time with his wife and children, engaging in a wide array of outdoor pursuits such as fishing, bike riding, hiking, swimming, skiing, tubing, and volleyball. Joe's enthusiasm for everything outdoors and his diverse range of interests make him a well-rounded individual, both in the professional and personal realms.