Day trading involves buying and selling financial instruments within the same trading day to profit from short-term price movements. Here are key strategies and considerations:
## Common Day Trading Strategies
**Scalping**: Making dozens of small trades throughout the day, holding positions for minutes or seconds to capture tiny price movements.
**Momentum Trading**: Identifying stocks with strong price movement and volume, riding the trend until it shows signs of reversal.
**Range Trading**: Buying at support levels and selling at resistance levels when a stock trades within a defined price range.
**Breakout Trading**: Entering positions when price breaks through key technical levels like support, resistance, or chart patterns.
**News-Based Trading**: Trading on immediate reactions to earnings reports, economic data, or company announcements.
## Essential Tools and Setup
**Technical Analysis**: Chart patterns, moving averages, RSI, MACD, volume indicators, and support/resistance levels.
**Trading Platform**: Fast execution, real-time data, advanced charting tools, and reliable internet connection.
**Risk Management**: Stop-loss orders, position sizing (typically 1-2% of capital per trade), and daily loss limits.
## Key Considerations
**Capital Requirements**: Pattern Day Trader rule requires $25,000 minimum in margin accounts for US traders making more than 3 day trades in 5 business days.
**Time Commitment**: Requires full attention during market hours, constant monitoring, and quick decision-making.
**Costs**: Commission fees, spreads, and taxes on short-term capital gains can significantly impact profitability.
**Success Rate**: Studies show that 80-90% of day traders lose money over time. Success requires discipline, emotional control, and extensive practice.
**Market Conditions**: Strategies need adaptation based on volatility, trends, and market sentiment.
Most successful day traders recommend starting with paper trading to practice strategies without real money, developing a detailed trading plan, and maintaining strict discipline around entry/exit rules and risk management.