Jump links: Definition & Rules • Accounts & Costs • Day-Trading Strategies • Risks & Management • Tools & Resources
Definition, Rules & Key Concepts
Day trading is a short-term trading approach where traders buy and sell securities—stocks, options, ETFs, or futures—within the same session. The goal is to capture small price movements and convert them into profit. In the U.S., the pattern day-trader (PDT) rule requires anyone who executes four or more day trades in five trading days, and whose day-trading activity is over 6 % of total trades, to maintain at least USD 25,000 in equity within a margin account.
Brokerage Accounts, Margin & Costs
Serious day traders rely on direct-access brokerage services offering fast order routing, real-time data, and low commissions. A margin account provides leverage—borrowed capital—to open larger positions than the cash balance. Remember: leverage amplifies both profits and losses. Track fees, routing costs, and SEC regulatory fees when sizing each trade.
Popular Day-Trading Strategies & Examples
Momentum Breakouts
Using news, earnings events, or volume spikes, a day trader buys a stock breaking above a key range. If price continues higher, they scale out for a quick return.
Gap & Go
Pre-market gaps—large overnight price jumps—often continue in the first trading hour. Traders set tight stops to limit downside risk.
VWAP Reversion
If price drifts too far from the volume-weighted average price, advanced traders fade the move, expecting a reversion back to VWAP.
Risks, Loss Limits & Risk-Tolerance
High volatility can wipe out capital quickly. Establish a daily maximum loss, use stop-loss orders, and track performance to refine trading strategies. Only risk an amount you can afford to lose without jeopardizing living expenses.
Tools, Information & Continuous Learning
Reliable trading software provides Level II quotes, heat-map data, and customizable charts. Combine broker analytics with free resources like TradingView or Yahoo Finance. Stay updated on market conditions through news feeds, SEC filings, and economic calendars.
Before funding a live account, practice in a simulator to build knowledge, test strategies, and develop emotional discipline.