• 
  How To Start Day Trading
• 10 Day Trading Tips for Beginners
• Day Trading For Beginners
• What Makes Day Trading Difficult?
• Deciding What and When To Buy
• Deciding When To Sell
• Day Trading Charts and Patterns
• How to Limit Losses
• FAQs
• The Bottom Line

• Trading
• Trading Skills

10 Day Trading Tips for Beginners Getting Started

By Justin Kuepper

Updated November 19, 2024

Reviewed by 

Samantha Silberstein

Fact checked by 

Suzanne Kvilhaug

Part of the Series

Day Trading Introduction

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Day trading is a strategy that involves buying and selling financial instruments at least once within the same day, attempting to profit from small price fluctuations. While recent records in major indexes like the S&P 500 make it seem easy to find profits, day trading is not without significant risks, especially since today’s markets can be quite volatile as rapid economic changes, shifting interest rates, and geopolitical developments lead to sudden price swings.

To succeed as a day trader in this this climate, it’s crucial to adopt a reflective strategy that emphasizes flexibility, risk management, and awareness of what’s behind recent market shifts. The best day trading platforms help traders improve their strategies and minimize their costs, offering apps that make it easy to analyze indicators and execute trades. Interactive Brokers and Webull, for example, offer real-time streaming quotes, charting tools, and the ability to enter and modify complex orders in quick succession.

But for those who are just beginning their day trading journey, this article will explain the key steps to getting started and explore 10-day trading tips for beginners—from setting aside funds and starting small to avoiding penny stocks and limiting losses.

Key Takeaways

• Day trading is only profitable in the long run when traders take it seriously and do their research.
• Day traders must be diligent, focused, objective, and unemotional in their work.
• Interactive Brokers and Webull are two recommended online brokers for day traders.
• Day traders often look at liquidity, volatility, and volume when deciding what stocks to buy.
• Some tools that day traders use to pinpoint buying points include candlestick chart patterns, trend lines and triangles, and volume.

How To Start Day Trading

Getting underway in day trading involves putting your financial resources together, setting up with a broker who can handle day trading volume, and engaging in self-education and strategic planning. Here’s how to start in five steps:

Step 1: Research trading strategies and principles.

Unlike professional day traders, retail day traders don’t necessarily need a special undergraduate degree. However, you still need to educate yourself. Before you start trading, it’s crucial to understand the trading principles and specific strategies used in day trading. Read books, take courses, and study financial markets. The major topic to study is technical analysis, which should include reading up on trading psychology and (this is a must) risk management.1

Step 2: Develop your trading plan.

Outline your investment goals, risk tolerance, and specific trading strategies you’ve picked up from Step 1. Your plan should specify your entry and exit criteria, how much capital you will risk on each trade, and your overall risk management strategy. Before investing real money, put your plan into practice with a real-time trading simulator. This helps you familiarize yourself with market behavior and the trading platform without financial risk.

Step 3: Choose a trading platform and fund your account.

You’ll want a reputable broker that caters to day traders and has low transaction fees, quick order execution, and a reliable trading platform. Once you’re ready, fund your account. It’s advisable to begin with a relatively small amount in your trading account and only put in money you can afford to lose.

Step 4: Begin trading with small positions.

This reduces the risks of losing all your money on one or a series of bad trades while you’re still learning. As you do so, continuously review your trades and check them against your learning resources to adjust your strategy. Day trading requires constantly adapting to changing situations.

Step 5: Maintain discipline.

Adjusting to changing circumstances does not mean shifting your stop-loss and stop-limit settings or other trading criteria as you take on more risk. Successful day trading relies very much on discipline and emotional control. Stick to your trading plan; don’t let emotions drive your decisions. That’s the way to quick ruin.

10 Day Trading Tips for Beginners

1. Knowledge Is Power

In addition to knowledge of procedures, day traders need to keep up with the latest stock market news and events that affect stocks. This included the Federal Reserve System’s interest rate plans, leading indicator announcements, and other economic, business, and financial news.

So, do your homework. Make a wish list of stocks you’d like to trade. Be informed about the selected companies, their stocks, and general markets. Scan business news and bookmark reliable online news outlets.

2. Set Aside Funds

Assess and commit to the amount of capital you’re willing to risk on each trade. Many successful day traders risk less than 1% to 2% of their accounts per trade. If you have a $40,000 trading account and are willing to risk 0.5% of your capital on each trade, your maximum loss per trade is $200 (0.5% x $40,000). Moreover, only trade with suitable online brokers and trading platforms.

Earmark funds you can trade with and are prepared to lose.

3. Set Aside Time

Day trading requires your time and attention. In fact, you’ll need to give up most of your day. Don’t consider it if you have limited time to spare.

Day trading requires a trader to track the markets and spot opportunities that can arise at any time during trading hours. Being aware and moving quickly are key.

4. Start Small

As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding prospects is easier with just a few stocks. It’s now common to trade fractional shares. That lets you specify smaller dollar amounts that you wish to invest.

This means that if Amazon.com (AMZN) shares are trading at $170, many brokers will now let you buy a fractional share for as low as $5.

5. Avoid Penny Stocks

You’re probably looking for deals and low prices but stay away from penny stocks. These stocks are often illiquid and the chances of hitting the jackpot with them are often bleak.

Many stocks trading under $5 a share become delisted from major stock exchanges and are only tradable over-the-counter (OTC). Unless you see a real opportunity and have done your research, steer clear of these. Finding real undervalued stocks can be demanding.

6. Time Those Trades

Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, contributing to price volatility. A seasoned player may be able to recognize patterns at the open and time orders to make profits. For beginners, it may be better to read the market without making any moves for the first 15 to 20 minutes.

The middle hours are usually less volatile. Then, the movement begins to pick up again toward the closing bell. Though rush hours offer opportunities, it’s safer for beginners to avoid them at first.

7. Cut Losses With Limit Orders

Decide what type of orders you’ll use to enter and exit trades. Will you use market orders or limit orders? A market order is executed at the best price available, with no price guarantee. It’s useful when you want to enter or exit the market and don’t care about getting filled at a specific price.

A limit order guarantees the price but not the execution.2 Limit orders can help you trade more precisely and confidently because you set the price at which your order should be executed. A limit order can cut your loss on reversals. However, if the market doesn’t reach your price, your order won’t be filled and you’ll maintain your position.

More sophisticated and experienced day traders may also employ options strategies to hedge their positions.

8. Be Realistic About Profits

A strategy doesn’t need to succeed all the time to be profitable. Traders can be successful by only profiting from 50% to 60% of their trades. However, they need to profit more on their winners than they lose on their losers. Ensure the financial risk on each trade is limited to a specific percentage of your account and that entry and exit methods are clearly defined.

9. Reflect on Investment Behavior

For day traders, frequent reflection on investment behavior is crucial. It helps them identify patterns, learn from past mistakes, and fine-tune their strategies. This fosters continuous learning and adapting to ever-changing market conditions. In addition, it encourages discipline and emotional control, which are key to successful trading.

10. Stick to the Plan

Successful traders have to move fast, but they don’t have to think fast. Why? Because they’ve developed a trading strategy in advance, along with the discipline to stick to it. It is important to follow your formula and methodology closely rather than try to chase profits. Don’t let your emotions get the best of you and make you abandon your strategy. Bear in mind a mantra of day traders: plan your trade and trade your plan.

Day Trading For Beginners

Now that you know some of the ins and outs of day trading, let’s review some of the key techniques new day traders can use.

When you’ve mastered these techniques, developed your own trading styles, and determined your end goals, you can use a series of strategies to help you in your quest for profits:

Following the trend: Anyone who follows the trend will buy when prices are rising or short sell when they drop. This is done on the assumption that prices that have been rising or falling steadily will continue to do so.

Contrarian investing: This strategy assumes a rise in prices will reverse and drop. The contrarian buys during a fall or short sells during a rise, with the express expectation that the trend will change.

Scalping: This is a style by which a speculator exploits small price gaps created by the bid-ask spread. This technique normally involves entering and exiting a position quickly—within minutes or even seconds.

Trading the news: Investors using this strategy will buy when good news is announced or short sell when there’s bad news. This can lead to greater volatility, which can lead to higher profits or losses.

What Makes Day Trading Difficult?

Day trading takes a lot of practice and know-how, and several factors can make it challenging.

First, know that you’re competing against professionals whose careers revolve around trading. These people have access to the best technology and connections in the industry, which means they’re set up to succeed. Jumping on the bandwagon usually means more profits for them.

Next, understand that Uncle Sam will want a cut of your profits, no matter how slim. You’ll have to pay taxes on any short-term gains—investments you hold for one year or less—at the marginal rate. The upside is that your losses will offset any gains.3

Also, as a beginning day trader, you may be prone to emotional and psychological biases that affect your trading—for instance, when your capital is involved and you’re losing money on a trade. Experienced, skilled professional traders with deep pockets can usually surmount these challenges.

Important

An early popularizer of day trading, Toby Crabel, is also credited with a classic day trading strategy, the opening range breakout. Crabel has had some influence on technical analysis, and he often suggested that day traders are social psychologists with a computer program.4

Deciding What and When To Buy

What To Buy

Day traders try to make money by exploiting minute price movements in individual assets (stocks, currencies, futures, and options). They usually leverage large amounts of capital to do so. In deciding what to buy—a stock, say—a typical day trader looks for three things:

1. Liquidity. A security with this allows you to buy and sell it easily and, hopefully, at a reasonable price. Liquidity is an advantage with tight spreads, or the difference between the bid and ask price of a stock, and for low slippage, or the difference between the expected price of a trade and the actual price.
2. Volatility. This measures the daily price range—the range in which a day trader operates. More volatility means greater potential for profit or loss.
3. Trading volume measures the number of times a stock is bought and sold in a given period. It’s common