What Is Day Trading and How To Learn It | Guide

Day trading is all about buying and selling assets within a single trading day, exploiting minor price movements across various markets including stocks, options, and forex. This article delves into the intricacies of day trading, highlighting its strategies, risks, rewards, and the discipline required to navigate its volatile waters.

From technical analysis to regulatory considerations and effective risk management, we offer you a comprehensive overview. Through an exploration of essential strategies and the pivotal role of continuous learning, the article serves as a foundational guide to the demanding yet potentially rewarding world of day trading.

Key Facts Day Trading
  • Day trading targets small price fluctuations within a single day across various securities like stocks, options, and forex, relying on technical analysis and discipline.
  • It offers high potential rewards and flexibility but comes with significant risks, including high volatility, time commitment, and emotional intensity.
  • Successful day trading requires understanding market behaviors, employing various strategies like scalping and momentum trading, and managing risks effectively.
  • Regulatory bodies like FINRA oversee day trading, emphasizing the need for proper account management to prevent overextension and ensure market integrity.
  • Beginners are advised to prioritize education, starting with a demo account to practice strategies without financial risk, amidst a low profitability rate for retail traders.
  • Day trading strategies leverage technical indicators to make informed decisions, with success demanding constant market engagement and adaptation.

Definition: What is Day Trading?

Day trading is a type of share dealing that sees traders buying and selling shares online, during the period of a single day. The intention is to profit from even small price fluctuations, and day traders will trade not only stocks, but many other securities like options, bonds, forex pairs, commodities, and exchange-traded funds (ETFs).

Day traders will employ a wide variety of intraday strategies to profit from the relatively minor (and likely short-lived) price movements of a variety of assets.

Day trading might involve many techniques and instruments to capitalize on price changes, and day traders typically make many trades in a single day, but they all close their positions before a trading day ends.

This strategy relies heavily on technical analysis, and moreover demands a competent and objective market view of traders, alongside rigid discipline. It can be very rewarding, but day trading is very much the realm of professionals because it comes with high risks, and a large degree of uncertainty.

This is not to suggest that retail traders can’t enter this market, not at all, but that so many professional traders are to be found here should serve as an indication to newcomers that, here, skills need to be learned and strong risk management applied.

Pros and cons of Day Trading

✅ Potential for high, frequent rewards❌ High risk trading, demanding a good grasp of markets and particularly the price behaviors of the assets traded
✅ Highly flexible trading style, ideal for those who are constantly monitoring the markets, and wish to dip in and out of markets, close their laptop, and move on❌ Fairly time consuming, as constant research and technical analysis is demanded if you wish to trade profitably
✅ Generally highly liquid markets make for easy entry and exit❌ Emotionally intense trading strategy, which punishes all but the most disciplined traders
✅ Builds skill levels through quick decision making and technical analysis❌ Misses out on trends and overnight movements
✅ The strategy allows for a high turnover of capital, with leverage and skills enabling huge profits at times❌ Day trading is bedeviled by market noise that makes profits elusive

How does Day Trading work?

Day trades are plays on very short-term volatility of stocks or other instruments on a given day. Price movements generate volatility, and the objective of the day trader is to buy at what is perceived to be a low point during a day’s price movements, and then close the position at a higher price, before the day’s end, selling for a profit.

The price at buying needs to move sufficiently for a day trader to move past break even, and generate enough profit to cover trading costs and still walk away with a net profit.

Day Trading snapshot

An example of a day trade sees you identifying a pattern (a trend reversal or continuation) in a company’s stock price, so you buy 500 shares for $11 each.

Not 10 minutes later, the stock’s price has moved up to $12,11, and you sell, bagging a profit of $500-very respectable for a single 10-minute trade. 

This is an ideal scenario, and it sounds so simple, but executing such quick trades for a profit more often than not, is in fact extremely challenging.

Markets and products eligible for Day Trading

Company stocks are one of the most popular securities employed in day trading, as the market is large, trading costs are low (very low or absent commissions), and there’s a lot of activity on a daily basis.

Bonds are also traded, as are option contracts, commodities, futures, and currencies-a diverse array of markets and instruments are employed by day traders.

Because many listed stocks are subject to slight price movements daily, and because in the absence of catastrophe, those price movements are likely to be within a usual range, day traders often favor buying and selling company shares.

How to learn Day Trading

It’s absolutely crucial that retail traders “learn the trade” of day trading, because your skills and commitment to understanding Day Trading in its fullness will be essential if you hope to experience the success of the pros.

We’d obviously recommend that you learn Day Trading with Witzel Trading, and that’s really not a simple sales funnel-we’ve looked at the available training out there and we’ve been day trading for years, so we know what you’re going to face and what you’re going to need to trade profitably.

Studying Day Trading is not the same as studying forex trading, for example, as Day Trading draws on far greater acumen that has to be learned, and focuses it on a pinpoint in time, and for that, you need a course pace, commitment, and extent that only Witzel Trading offers. 

How long does it take to learn Day Trading?

Generally, to understand the nuances of any particular trading strategy will take a few weeks of dedicated learning and practicing.

That said, understanding something and practicing it successfully are worlds apart, and Day Trading is really one of those things that make the old adage of “good things don’t come easily” utterly valid.

It can take months to truly learn Day Trading, and years before you’re habitually turning a profit.

Unless you left school and went to work as an apprentice stockbroker years ago, learning Day Trading will be like embarking on a whole new course of study, regardless of your retail trading experience.

Very much like the average course of study at a university would be 4 years, plus another 2 for the master’s program, so too will successful Day Trading ask a similar commitment of learning from you.

When you think about it, day traders step in and pull money out of the stock markets every day… If it was simple to learn and easy as pie, everyone would do it, but it isn’t.

Is Day Trading legal?-Regulation

Day Trading is perfectly legal, although the strategy has attracted some regulatory attention over the years, for a variety of reasons.

It’s worth mentioning here that the typical day trader is very experienced and well funded (usually working for a large financial institution), and that Day Trading is regulated by the Financial Industry Regulatory Authority (FINRA)-something for American traders or those trading inside the US to note.

Your broker might inhibit Day Trading on your account if aspects of your trading violate Regulation T (a bundle of regulatory provisions that preside over your cash account, and how much credit you can leverage from the brokerage).

It basically boils down to being able to borrow 50% (and no more) of the purchase price of a security, the rest has to be cash from your account, and margin accounts can also be tied up in FINRA legislation on the same basis too.

According to further FINRA regulations, you can also be classified as a pattern day trader (PDT) when you perform 4 or more day trades (opening and closing the trades intraday) over 5 business days if those trades exceed 6% of all of your total margin account trades (which will mean you’ll need to maintain a minimum of $25,000 in your margin account to avoid such scrutiny).

Also, before 1968, a practice known as “late day trading” (also called “backward pricing”) allowed investors to gobble up mutual funds at a previous closing price, and while the SEC developed Rule 22c-1 that ended the practice, regulators have kept a close eye ever since.

So, Day Trading is certainly not illegal nor unethical, but regulatory authorities have enacted legislation that prevents novice traders overextending themselves and winding up broke, as well as enacting various other snippets of legislation to ensure that Day Trading remains devoid of manipulation.

Getting started with a demo account

It’s well worth noting that anecdotal evidence puts profitability in Day Trading for retail traders at less than 10%, meaning most who “try their hand” at Day Trading have their accounts depleted and fall out of trading.

Make no mistake about it, Day Trading’s simple architecture and high appeal mask the very high risk that Day Trading holds for the uninitiated, and without first studying and learning along the way with a demo account, only 1 in a 1000 traders will still be in Day Trading after a week, or less.

The reason why Day Trading is seen as the ‘realm of the pros’ is because it’s populated by experienced, professional traders, and at the very least, retail traders will need to study Day Trading diligently, and open a demo account with which to practice, so as to try to equal the kind of exposure pro traders have had.

A demo account allows you to experience the regular and walk-in pitfalls of Day Trading without suffering actual financial loss, and it will legitimately prime you for a real entry into Day Trading with your finances still intact.

What to consider as a beginner

Top priority for a beginner day trader should be studying Day Trading from A -Z, no exceptions. You’ll need to feel completely at home with stock markets and their daily realities.

While many analysts and traders will tell you all about the perils of their particular strategy in the markets they favor, Day Trading takes no prisoners, and spares no one a complete wipeout of their kitty when they jump into it without some learned skills.

You’ll need to consider the type of brokerage account you open and confirm that your Day Trading ambitions will be enabled by the broker, after you’ve run through your demo account practice.

You’ll pick a strategy and start small as a first component of risk management

Day Trading is for highly disciplined and extremely cautious traders, and any “winging it” will result in catastrophic losses.

Risk management will kick in after your studies as the prime consideration that keeps you in Day Trading, and it’s perfectly acceptable to step away for a moment to study details a bit more-patience generates profits over time with Day Trading.

Opening a Day Trading broker account

Mentioned above, opening an account that will enable your Day Trading ambitions is crucial at the outset, although of course you can demo on any platform you personally enjoy without restrictions.

The simplest way to escape classification as a pattern day trader (PDT) by regulators (your brokerage will not facilitate PDT without toeing the regulators’ line) is to maintain the minimum required balance of $25,000.

Since this won’t be possible for many newcomers, it’s best to play open cards with the brokers on your shortlist, and discuss your goals.

It’s in the broker’s interest to formulate a route towards your Day Trading aims over the longer term, and every brokerage will have a different stance on enabling you, although all will conform (at least in the US) to the FINRA stipulations.

A popular route for many retail traders is trading other markets and strategies to build up the funds needed to escape PDT flagging, and this also gives lots of great experience in the markets that you can apply once you enter the Day Trading realm.

Strategies for Day Trading

Placing trades 

Day traders are trying to exploit very small price movements in an assortment of assets (stocks, futures, currencies, and even options) and they keep focused on 3 principal considerations, while using indicators constantly.

  • For one, they favor highly liquid securities.
  • Secondly, they monitor the volatility of an asset (the price’s daily range).
  • Lastly, they keep a sharp eye on trading volume, as volume can precipitate a price movement where they’ll make some profit.

Entry and exit points are crucial with Day Trading, and when it comes to specific strategies, you’ll find most day traders working off one of the following:

  • Scalping in Day Trading sees scalpers selling almost immediately after they move into profit, in order to avoid substantial losses, and glean substantial dividends.
  • Daily pivot day traders will try to identify the low point in a reversal and buy in to catch profit on the ensuing uptrend.
  • Fading is a strategy that shorts stocks after a sharp uptick in price, as fade traders believe the stock will dip again (being overbought) and that early buyers will sell off to take profit.
  • Momentum day traders look for strong trends spurred by news that are also supported by a high volume (going long with the trend until volume wanes, or fade trading the looming correction).

From the above brief depictions, it’s easy to see how simple Day Trading should be, yet it’s also as easy to see how badly things can go wrong when traders misread the markets, and markets are always fickle, never guaranteed.

The best Day Trading indicators

Professional day traders will keep their eye on a multitude of considerations, and technical indicators are a big part of their toolbox.

The most common and valuable indicators for day traders will include:

  • MACD that shows changes in broad price movement
  • Stochastic Oscillator, which points to momentum
  • Relative Strength Index (RSI) that also points to momentum
  • On Balance Volume (OBV) that shows trading volume/momentum
  • Average Directional Index (ADX) that gauges trend strength
  • Accumulation/distribution line (ADL) that can give traders a glimpse of both the nature of price changes as well as the associated volume
  • Bollinger Bands, which are another momentum indicator

Technical indicators employed by day traders are many, but they all help pinpoint entry points and, when used together, can provide the best available assurance of a successful trade.

Day traders (and indeed any trader) can simply view the markets’ price action and see the broad volatility and general momentum, if any, but technical indicators give a far quicker and more accurate assessment, something day traders absolutely need.

Taxes on Day Trading

Day Trading is unfortunately classed as a capital gain, and your taxation rate will vary, based on your trading behavior and overall income.

Typically, taxes will start around 10% and can reach almost 40%, based on individual circumstances and country jurisdiction.

Capital gains tax can sometimes be less than obnoxious, but that is the longer term capital gains tax, where rates are at most half of the maximum mentioned above.

Day traders can never hope to fall into that bracket, however, and your profitability will need to factor in your anticipated taxation-something to work out beforehand as part of your trading plan.

Learn Day Trading with Witzel Trading

Day Trading is a skill that has to be learned, and anyone telling you that they just “walked into it off the street” is either lying, or from a planet of advanced alien beings, or both.

Day Trading really sorts out the dedicated traders from the wannabes, but in spite of its demands, it can be highly profitable-one of the most profitable trading strategies, in fact.

Sign up and learn Day Trading with Witzel Trading, because:

  • Your best chance of success lies in a thorough understanding of the markets.
  • Day Trading is a high risk strategy, and only serious study and tested skills can hope to bring you up to par with the institutional professionals who have the best technology (and financial clout) on their side.
  • You’ll be learning alongside trainers who have been there and done it, and worked their way through the mill to come out as profitable day traders.

The difference between studying Day Trading with Witzel Trading and literally anywhere else, is that we’re interested in your long term success.

Our students are our ambassadors, and we offer something of real value that you will apply for the rest of your trading life, for profit and success.

Conclusion: Day Trading requires constant engagement

Those interested in day trading need to realize a crucial disadvantage they face, and that is the substantial difference between the technological platforms of retail traders and Wall Street traders.

Institutional traders have the best equipment on the planet to employ algorithms, spot patterns, and trade profitably overall, and also have massive financial clout with which to effect trades.

That said, for the trader willing to learn and apply their minds, their patience, and caution, Day Trading can be very profitable, and is alluring for many good reasons.

Constant engagement with learning and testing is needed-indeed constant engagement with the markets-and Day Trading therefore won’t appeal to those looking for ‘quick and easy’, or any other less committed approach.

Frequently asked questions on Day Trading:

How should a beginner start day trading?

Study. Study comes first when looking at Day Trading, because it demands a seamless understanding of the markets and is extremely risky for novices. This should be followed by loads of practice on a demo account-Day Trading is a place where a demo account really pays dividends.

Do day traders pay taxes?

Yes, Day Trading profits (and indeed any trading and investing dividend) is considered as a capital gain in almost every jurisdiction, and day traders will pay a variable rate of capital gains tax, based on their trading behavior and overall income, something that needs to be worked into profitability when trading.

What is the success rate of day trading?

Anecdotal evidence suggests a very low success rate among retail traders (4 – 5%), but that is an overall for traders per se. For those willing to learn the ropes of Day Trading and apply some patience and constant learning and engagement, profitability is not that elusive.

Why is day trading so hard?

Day Trading focuses on very minor price movements that have to be read correctly, and the vast majority of day traders cannot afford to sit and hold an asset in the hopes of getting out even or ahead, if the trade goes against them. It ties up too much capital and is fundamentally not the way to do things. The architecture is relatively simple, but with Day Trading, losses hold to the same architecture too. You’re jumping in and out of markets, buying and selling assets in a moment, and even with the best available indicators, it takes really refined skills to be right more often than wrong.

How do I train to be a day trader?

Study Day Trading with Witzel Trading, because we’re not “selling a course”, we’re sharing years of expertise in the full understanding that successful Day Trading can be a lifelong game-changer. There are many, many “trading courses” available worldwide, but very few will give you the insight and acumen you’ll gain by learning with Witzel Trading.



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