Did you know that Day Trading is one of the most popular styles among professional traders? It’s because it can be a very profitable way of operating the financial markets, If you already asked yourself “What is Day Trading?”, then you’re in the right place to learn!
I have been using this style in my trading career for more than twenty years, and I want to teach you the very best essentials. That’s why I wrote this article for you! To guide you through all the necessary information.
Keep on reading, and learn about how to day trade.
What is Day Trading?
Day Trading is the style in which the selling and buying of securities occur within a day. It means that the trader opens and closes trades on the same day in order to get some profit.
So, for your operation to be considered Day Trading, you will have to open positions early in the day and close them minutes or hours later. All comes to the selling and buying of securities within the same day.
Doing Day Trading requires a lot of knowledge about the financial markets and securities, so be careful, and learn everything before implementing this style.
How Does Day Trading Work?
Day Trading is possible thanks to the volatility of the price of the securities. One of the main objectives when doing Day Trading is precisely to find out which securities have a lot of volatility, ergo, the behavior of the security’s price that goes up and down many times within a day; so the trader can make short term movements seeking profit.
Before applying this trading style, you should have a trading strategy and a trading plan; those tools will help you to make an analysis before and after operating the market.
As you can see, Day Trading is an exciting style of trading that you can learn and apply. And what exactly should you know and analyze? Keep on reading to find out!
Best Indicators for Day Trading
First, let me teach you about Technical Analysis. This method consists of the observation, evaluation, and understanding of the price movements and patterns to identify selling and buying opportunities. The main tools for this kind of analysis are charts, graphs, and indicators.
You can analyze the price of the securities using indicators. Here are some of the best ones you can include in your day trading strategy:
Keltner Channel Indicator: this indicator creates a set of bands above and below a security’s price. These bands are formed based on volatility and help you determine a trend direction.
Regression line: this indicator helps to identify trends. It plots the end of a series of linear regression lines drawn on consecutive days.
You can use it to help you find the enter and exit of trades.
MACD BB (Moving Average Convergence Divergence) Indicator: This indicator helps find points of change in a trend and its strength. It appears separate from your chart and consists of two lines and tiny points.
In MDC Trading Academy we have already an article about indicators; go ahead and read it to learn more about them.
Best Brokers for Day Trading
A broker is an intermediary between you and the financial markets; with it, you can sell, buy or change securities. If you want to choose a broker, you should consider its reputation, usability, the tools it has, and the commissions the charges for every transaction.
Even though there are dozens of options, one of the online brokers you can check are:
- Ninja Trade: is a platform that offers software and brokerage for traders. Founded in 2003, it is one of the leaders in the industry, helping more than 500,000 traders around the globe. It supports operations with futures, Forex, EFTS, and stocks.
- TradeStation: this platform offers services to operate with securities and futures, thanks to its powerful trading technology and online brokerage services. Here you can also find trading education.
- Interactive Brokers: is a broker/dealer business on over 150 market destinations worldwide. It offers services for trade products such as stocks, options, futures, currencies, bonds, gold, crypto, and funds.
- TD Ameritrade: is a platform that provides investing and trading services to operate with securities such as complex options, futures, and foreign exchange.
To choose the best one for you, keep in mind the aspects I mentioned before; remember that you can practice using a simulator, so you don’t use real money. This will help you to understand the broker better, and to be more familiar with it. Almost any broker has a simulator like Ninja Trader’s one.
Can you Day Trade in Stocks?
Yes, you can Day Trade in stocks in the stock exchange market. You can use the Day Trading style in Forex, futures, options, crypto, and more, one of the limitations of this type of style is related to volatility. If the security you want to sell, buy or exchange doesn’t have high volatility, you won’t be able to make good traders get profit.
Another important thing to consider is the volume of the transactions of security: the more the better. The volume represents the number of units that are involved in transactions in a specific period.
How do Day Traders Pick Stocks?
As I mentioned in the last paragraph, you should follow the volume and volatility of a stock. This will lead you to a better understanding of the behavior of the price. Also, keep an eye on the trends and range using the Japanese candlesticks chart.
You can also follow the trends and the tendency of a stock; use a stock screener as a tool to do this.
In the end, it will also depend on the strategy you apply on Day Trading to know which indicator will suit you the best.
Best Stocks for Day Trading
In MDC Trading Academy we like to be honest. That being said, I want to let you know that there is no such a thing as “best stocks” for Day Trading; no one can recommend you to trade some stock if they don’t know your strategy, your capital, and your objectives. So, be careful with recommendations, and just take them if they adjust within your trading plan.
Best Day Trading Strategies
There are many trading strategies out there, I don’t think one of them is the best. Any strategy can help you with something, but as I told you, choose the best for you.
But do not worry, here are some of them and you can adopt one to your day trading strategy:
The trading news strategy is used to operate the financial markets through the knowledge about what is happening in the world thanks to the news and how they affect the price of the securities.
The High-Frequency trading strategy is used by banks and investment funds and relies on the use of automatized technology using algorithms to exploit small fluctuations and market inefficiencies.
The scalping strategy is used to take advantage of short movements in the price of the securities to earn small amounts of profit and accumulate them.
The daily pivot strategy is used for profiting from a security’s daily volatility. You should attempt to buy at the low of the day and sell at the high of the day.
Day Trading Platforms
A trading platform is a software that contains all the necessary tools to place trades and understand the behavior of the financial markets. Some platforms are more oriented to analysis and some with brokers included, or with some broker adaptations
These are the ones we are familiar with in MDC Trading Academy:
Day Trading Tips
To be a successful Day Trader you should be always learning, practicing, and applying our best five tips:
- Use a simulator
With a simulator you can test if your strategy is effective. This is a great way for you to put into practice everything you learned about financial trading and how you behave while operating the markets. The main benefit of using a simulator is that you are not using real money, so it is risk-free. This will give you the freedom to make many types of operations and see how they probably can work in real life.
Practicing Day Trading in a simulator is a great option to understand how many transactions you will be able to do in a broker and how approximately they will cost you.
- Do backtesting
Backtesting is a great way to prove if some strategy will be effective. This tool helps you to verify its viability, it is done with historical data, so with the help of information from the past, you can prove if some of the operations you wanted to make would be proficient in a trading strategy.
Here are some considerations you have to keep track on:
- Total earn and loss.
- Volatility indicators.
- Average earnings and losses.
- Amount of capital used. Have a trading log
Using a trading log will make a difference in your trading career. It will help you to measure the technical effectiveness and emotions in your operation since you are going to type the details of your strategy. Every operation you make should be written down here.
Your trading log will have technical and emotional information. The psychological aspect is crucial to know how you are feeling while applying your strategy and to identify the emotions involved in your operation.
- Have a trading journal
In addition to your trading log, using a trading journal will give you a broader vision of your trading activity. Here you are going to write how you feel before, during, and after trading. , and also after seeing your results.
This knowledge of your emotions will help you to understand the many mental states you have during your day operating the financial markets. You should identify which emotions are affecting your career and which are helping you.
- Be responsible
You have to be responsible for your results. The results you get are influenced by your technical analysis, the amount of time you spent practicing, and your strategy. So be aware of everything you made to achieve success.
How to Learn About Day Trading?
As you saw, Day Trading is an excellent trading style that has many interesting aspects for understanding the day to day of the financial markets. If you choose to trade futures the possibilities increases, as you can operate with many other securities such as foreign exchanges, commodities, crypto coins, stock market indexes, and more.
If you want to increase your income with trading, you have arrived at the perfect place. In MDC Training Academy we specialized in day trading, and we can teach you how to do it professionally. Be part of our Senior Trader Program and learn all about trading with our course designed to adapt to your needs.
Do not hesitate and start to be financially free with trading!
Best Day Trading Platforms
There is not exactly something like “best platforms”. It will depend on what best suits you according to your needs.
Nevertheless, these are one of the platforms you should check out:
Can Day Trading Actually be Profitable?
Yes, Day Trading can be profitable. It depends of course on the experience you have and the effectiveness of your trading strategy.
Why do Day Traders Fail?
There are several reasons for a Day Trader to fail, but mainly is because they are not well educated to operate the financial markets. Also, they do not know how to choose and implement a strategy. And finally, they are not mentally prepared for trading, this is called the psychology of trading.
What Taxes do Day Traders Pay?
According to de IRS:
Special rules apply if you’re a trader in securities, in the business of buying and selling securities for your account. The law considers this to be a business, even though a trader doesn’t maintain an inventory and doesn’t have customers.
Can you Day Trade with 1.000 dollars?
Yes, you can trade with 1.000 dollars. This will be your capital and you will need to manage it right because Day Trading implies many operations during the day. Think precisely how much money you will use for each operation.
You can also start your account with as much as 500 dollars.
Is Day Trading Legal?
Yes, Day Trading is a legal activity and a form of business for many people. Nevertheless, you should do your trading activity on brokers that are regulated by the government of your country.
Is Day Trading Worth it?
Day Trading is worth the try, it is a great profession for understanding and operating the financial markets, and if you do it correctly you can earn enough money to live a happy life.
Stock Market investor since 1990. Professional futures trader since 2008. Finance Specialist and Systems Engineer; he worked for more than nine years on Wall Street. Head Trader and Co-Founder of MDC Capital Group with vast experience mentoring traders. Architect and designer of the MDC methodology. His passion is to transform lives through trading.