Day Trading

What is Day Trading?

If you have an interest in trading, you have come across the term “day trading” for sure. Some of you might have a basic understanding of day trading. And some of you might be willing to learn more about this trading.

Considering this, we have gathered information from various sources. This article aims to help you understand the fundamentals of day trading. Moreover, you’ll get to know about the principles and potential risks related to day trading. So keep reading if you wish to make some money by day trading.

Understanding Day Trading

Have you ever thought of making money by trading stocks within a single trading day? We’ll assume that you have. So that’s the essence of day trading. It’s a thrilling way to make a profit from the ups and downs of the financial market.

No doubt, day trading presents a fascinating opportunity to make money in a single but. But this opportunity also involves risk. 

Day trading is when you buy and sell stocks, currencies, and other assets on the same day. Day trading is different from the traditional market in which an investor buys and holds assets for a long time. But, in day trading, an investor aims to make money by taking advantage of short-term price fluctuations.

Investors buy stocks when they think the stock price is down. And they sell when they think the stock market is up. Here the goal is to make money by taking advantage of small price changes before the market closes.

Example of Day Trading in the Market

Let’s assume you’re an investor. You’ll be one in the future.

So let’s say you decide to do day trading. You do your research and buy a stock of Apple. You buy the stock at 15 while assuming that its value will go up. After one or two hours, the value goes to 20$.

You sell the stock and make a profit of 5$. The value can go up and down several times in a single it.

So you have to follow a proactive approach to sell the stock at the right time. It helps reduce loss and allows for profit through technical analysis.  

This is the basic concept of day trading. But it’s not easy to make money in day trading. If the value can go up in no time, it can also go down as quickly. So the risk factor is always there.

The Basic Tools of Day Trading

Making money from day trading isn’t an easy task. Day trading requires knowledge, skill, and a bit of luck to make money. To get started day trading, you require these basic tools.

Knowledge is the key

To become a successful day trader, you need to learn the basics of trading. You can find plenty of resources to educate yourself.

You can read books and online blogs and articles. You can purchase online courses and video tutorials to master day trading. Also, you can use platforms like YouTube to learn the fundamentals of day trading.

Market Research and Analysis

The knowledge of day trading can help you in the analysis of the market. It will enable you to examine market trends and trading strategies to identify trading opportunities. Moreover, market research and analysis can help minimize the risk factor.

Market Selection

Market selection is an essential factor in day trading. Not all markets are the same. They have different characteristics, factors affecting prices, and levels of risk. So consider your interests, risk tolerance, and skill level while selecting your market.

You can choose from stock trade, foreign exchange, cryptocurrencies, or other assets. The fundamental knowledge of day trading can help you choose your market.

Choose a Perfect Trading Platform

Like the market, selecting a perfect trading platform is also essential in day trading. A trading platform is an app that connects you with the financial market. You can execute trades, analyze charts, and monitor prices.

In short, a trading platform helps you manage your day trading activities. Consider the following factors while selecting a trading platform:

  • Reliability and stability
  • User-friendly interface
  • Asset Availability
  • Charting tools
  • Technical indicators

Plan, Execute and Monitor

Plan your day trading strategies before you start. The knowledge and skill can help you plan effective strategies. And when the day starts, execute your trading strategies.

Monitor your position throughout the day. It will enable you to make timely decisions to make a profit.

Effective Strategies of Day Trading

The knowledge and market research enable day traders to plan effective strategies. Here are some of the strategies of a successful day trader:

Momentum Trading

Momentum trading is one of the most popular strategies in day trading. It focuses on capitalizing on short-term price movements and trends in the market.

Using this strategy, a day trader plans to identify assets that are experiencing significant price movements. A day trader aims to take advantage of the price movement, either up or down, by buying or selling them. A day trader executes the trade in the hope that the trend will continue for a brief period.

The quickly changing nature makes momentum trading rewarding. But the risk factor is also high in the strategy. So you will need a good understanding of technical analysis and risk management to execute this strategy.


Scalping is another popular strategy in day trading. Not only day traders follow this strategy. 

In this strategy, traders aim to make small profits from minor price fluctuations during the day. The goal is to trade fast and make small profits.

Day traders don’t hold assets for a long period. They like to trade in minutes or even seconds.

The second the value goes up a little, traders sell their assets. They aim to gain a small profit. But they execute more than a dozen trades to capture those small price changes. 

Scalping is a low-risk low-profit strategy. A single trade might not earn you huge profits. But it also reduces the risk to a minimum level. So if you plan to play safe, this is your strategy to follow.

Scalping is also a fast-paced strategy. It requires a good understanding of the market, quick decision-making, and a lot of practice.

Trend Following

Trend followers aim to identify and ride the prevailing market trend. Trend following strategy explains that assets tend to move in a particular direction for a certain period. So day traders seek to capitalize on these trends and make a profit.

Reversal Trading

Reversal traders make money from short-term price reversals that go against the main trend, unlike trend followers. Reversal traders look for moments when the price briefly shifts direction instead of following the market’s main trend. It is a counter-trend following. In this strategy, traders buy when the trend is going up and sell when it’s going down.

Risk Management in Day Trading

There is no profit without risk, don’t we all agree? Investors know the trading market for its high-risk factor.

And there is no way you can eliminate the risk factor. But you can work to minimize it. Here are some of the tips that can help you minimize the risk factor in day trading:

Set a Limited Budget

The first thing is to limit your budget. Allocate investing money that you can afford to lose.

And once you have set that limit, adhere to it. Invest that amount during the day. And if you don’t make a profit, don’t rush to invest more.

Use Stop-Loss Orders

Stop-loss orders are an essential risk management tool in day trading. Traders use these tools to protect their investments from major losses.

This tool automatically sells your asset if its price drops to a certain level. As a result, it limits potential losses.

You can set this tool to a specific price level at which you want the stop-loss order to trigger. And when the price reaches the specified level the order closes the trade automatically.


Diversity is another way to reduce the risk in day trading. You can invest in many assets like stock, foreign exchange, and many others. So try not to invest all your money in one asset. Diversify your investment and spread the risk.

Be Rational

Successful day trading requires skills and patience. Earning profit can make you excited. But at the same time, losing money can make you stressed.

So you need to stay calm and make rational decisions. Don’t let your emotions influence your actions.

Start Small

It is a smart thing to start small in the beginning. So begin your day trading journey with small trade sizes. And once you gain the experience, you can gradually increase your trade frequency. So start small to reduce the risk level.

Frequently Asked Questions(FAQs)

Does Day Trading Have Any Benefits?

Indeed day trading holds several benefits for investors. It offers the possibility of making a profit in a single day. It also helps investors in making effective strategic decisions. Investors can use such strategies in the traditional trading market.

Moreover, day trading enhances market awareness. Deep market analysis and research help investors polish their skills.

Can Anyone Do Day Trading?

Day trading involves a high factor. Moreover, it requires a deep understanding of the market and a high tolerance for potential losses. So we can conclude that day trading is not for everybody.

How Much Money Do I Need to Start Day Trading?

The amount you need to start trading varies based on various factors. It can depend on your strategies and risk tolerance. But the minimum amount required is 25000$ to avoid the “pattern day trader” rule.


No doubt, day trading presents an avenue for investors to earn money from the financial markets. But, making a profit in day trading is not as easy as it sounds. It requires many things to make this happen. Knowledge, practice, skill, and tolerance are what you need.

People indeed make good money from day trading. But it is also true that people also lose money in this trading. So the risk factor is always there.

If you’re willing to invest in day trading, master the art. take the time to learn, practice, and approach it with caution and a realistic mindset.

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