Day Trading: Learn about strategies, tips and other insights

Years ago, only folks employed by big financial institutions could actively trade stocks. However, online trading and instant news sharing have changed that. User-friendly trading apps and zero-commission services like markets.com have made it simple for regular folks to trade like professionals.

Day trading could become a profitable profession if done correctly, but it can be tough for beginners, especially those without a solid strategy. It's important to note that even experienced day traders can face difficulties and encounter losses at times.

In this article, we’ll explain what day trading is, and how it works:

What Is Day Trading?

Day trading refers to buying and selling securities within a single day, sometimes within seconds. Unlike traditional investing, it doesn’t involve long-term holdings; instead, it focuses on capitalizing on the predicted price fluctuations that happen during a trading session.

Day trading is common in the share markets and also the foreign exchange (forex) where currencies are traded.

Let’s delve into who are day traders

Who are Day Traders?

Day traders are individuals or professionals who engage in the practice of buying and selling financial instruments, such as stocks, options, cryptos or currencies, within the same trading day. They aim to profit from short-term price movements and typically do not hold positions overnight. Day traders often use various strategies, technical analysis, and chart patterns to make quick trading decisions and capitalize on intraday market volatility.

Day traders can vary widely in terms of experience, resources, and goals. Some are full-time traders who make a living from day trading, while others may be part-time traders looking to supplement their income or invest their savings actively. It's important to note that day trading carries significant risks and requires a deep understanding of the markets, trading strategies, and risk management techniques. Success in day trading is not guaranteed, and many traders experience losses along with gains.

How to day trade? (15 steps for beginners)

Day trading is a complex and high-risk activity that requires a solid understanding of the financial markets, trading strategies, risk management, and a disciplined approach. Here are some steps to get started with day trading:

1. Educate yourself by learning about the financial markets you want to trade in. Understand the basics of stocks, forex, or other instruments you plan to trade. Read some books, take online courses, and stay updated on market news and trends.
2. Choose which financial market(s) you want to trade in. Common options include the stock market, forex (foreign exchange), futures, and cryptocurrencies. Each market has its own dynamics and risks.
3. Develop a trading plan by creating a comprehensive trading plan that outlines your goals, risk tolerance, trading strategies, and money management rules. Your plan should include entry and exit criteria for trades.
4. Select a reliable broker. Choose a reputable and well-regulated broker that offers the trading instruments and tools you need. Ensure they have competitive fees and provide access to real-time market data.
5. Practice with a demo account. Most brokers offer demo accounts that allow you to practice trading with virtual money. This is a good way to gain real trading experience without risking your capital.
6. Choose a trading strategy. There are numerous day trading strategies, such as scalping, momentum trading, and range trading. Pick a strategy that aligns with your trading style and risk tolerance.
7. Set up technical analysis tools to familiarize yourself with technical analysis and use charting software and indicators to identify potential entry and exit points for trades.
8. Risk management. Implement strict risk management rules by determining how much capital you are willing to risk on each trade and set stop-loss orders to limit potential losses.
9. Start small - When you begin day trading with real money, start with a small capital amount that you can afford to lose. This will help you gain more in-depth experience without risking too much.
10. Keep Emotions in Check - Emotional discipline is crucial in day trading. Stick to your trading plan and avoid making impulsive decisions that result from fear or greed.
11. Trade during liquid hours, by emphasizing trading during the most liquid hours of the market when there is high trading volume. This could lead to better price execution and reduced spreads.
12. Keep records by maintaining a detailed trading journal to track your trades, strategies, and performance. Analyzing your past trades can help you improve over time.
13. Continuous learning and stay updated with market news and constantly refine your trading skills. Markets evolve, and it's essential to adapt.
14. Be Prepared for losses sometimes. Traders should understand that losses are a part of day trading. Avoid chasing earnings by overtrading or increasing your risk excessively.
15. Compliance and taxation. Always ensure you comply with all relevant financial regulations and tax laws in your jurisdiction. Day trading can have tax implications, so seek professional advice if needed.

Remember that day trading is not a guaranteed way to make money, and it carries significant risks. Many traders experience losses, and success in day trading requires dedication, discipline, and ongoing learning.

If you are a Muslim, you may ask the following question; (non-Muslims may skip this part)

Is day trading haram?

Whether day trading is considered "haram" (forbidden) or permissible in Islam depends on how it is conducted and whether it adheres to Islamic principles. Islamic finance principles are guided by Shari’ah law, which prohibits certain activities, including:

Riba (Usury/Interest): Islam strictly forbids earning or paying interest (usury). Therefore, engaging in activities that involve interest-bearing loans or transactions is not allowed.

Gharar (Uncertainty/Excessive Risk): Transactions that involve excessive uncertainty or ambiguity (Gharar) are discouraged in Islamic finance.

Speculation and Gambling: Activities that resemble gambling or excessive speculation are generally prohibited.

For day trading to be considered permissible in Islamic finance, it should adhere to the following principles:

Halal Assets: Trade in assets that are considered halal (permissible) according to Islamic principles. In most cases, trading in shares of companies that do not engage in prohibited activities (e.g., alcohol, gambling, pork) is allowed.

Avoidance of Riba: Ensure that trading is done without involving interest-bearing loans or earning interest on margin accounts.

Immediate Exchange: Day trading often involves immediate exchange (spot transactions), which is generally considered acceptable in Islamic finance.

Avoid Excessive Speculation: Day trading should not involve excessive speculation or resemble gambling. Trades should be based on informed decisions and analysis. Traders may implement risk management techniques, such as setting stop-loss orders, to mitigate risks.

Avoiding Margin Trading: Margin trading, which involves borrowing money to trade, is often associated with interest, so it should be avoided.

It's important to note that opinions on day trading within the Islamic finance community may vary, and scholars may have different interpretations of Shari’ah law.

Some Islamic scholars and financial institutions have developed specific Islamic trading accounts and guidelines to ensure compliance with Shari’ah principles.

individuals who want to adhere to Islamic finance principles might consult with a qualified Islamic scholar or advisor who can provide guidance on whether a specific trading activity is compliant with Shari’ah law and Islamic principles.

How many trading days in a year?

The number of trading days in a year varies by financial market and country, but for major US stock markets like the NYSE and NASDAQ, there are generally around 252 to 253 trading days. These markets typically operate from Monday to Friday, with closures on recognized holidays such as New Year's Day, Independence Day, Thanksgiving, and Christmas.

Trading calendars could change, and global markets may have different trading days and holidays. The forex market, for instance, operates 24/5 during the business week, so it doesn't follow the same traditional trading day and holiday schedule as stock markets. For specific market or country trading calendars, it's better to check out the relevant exchange or financial authority for the latest information.

Day Trade in a nutshell

Successful day trading requires not only skill and strategy but also the right brokerage partner. A user-friendly trading platform, competitive pricing, and access to a wide range of financial instruments, markets.com offers an excellent choice for both beginner and experienced traders.

Whether you're looking to explore stock, forex, cryptocurrency, or other assets, markets.com provides the tools and resources you need to make informed trading decisions.

Become a member of our trading community and access a cutting-edge trading platform

Take your trading to the next level and start your journey with markets.com today.

"When considering "CFDs" for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice."