How to Start Day Trading Successfully? A Beginner Guide

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To start day trading, a trader needs to master a number of skills and strategies that will help you earn more. TU experts prepared this in-depth guide for beginners on how to start their day trading careers.

This article will cover what day trading involves, how to day trade, what the risks and opportunities of day trading are, and a few other useful things to get readers started on the right foot.

What is Day Trading

Day trading is the activity of buying and selling financial instruments (usually stocks and cryptocurrencies) within a single trading day to sell them for more than what they were bought for. That’s quite a lot to take in, so allow us to illustrate this with an example.

For example, if someone buys 100 shares of Apple stock at $148.00 and sells them one hour later at $148.19, it’s called day trading. Day traders aim to obtain such results, or even greater ones multiple times a day. But earning profits through day trading is easier said than done because there are many risks involved. These risks include losing some money or getting into debt if you trade with too much leverage from the broker.

However, the opportunities are desirable because you could make a nice profit if you do it wisely, pay attention to many details, or be lucky.

Why Is Day Trading Difficult?

Here are a few of the difficulties of day trading.

Intraday volatility – Intraday volatility refers to the price fluctuations of a stock that happen between the start and end of a trading day. It is, in most cases, very unpredictable, so you have no guarantee that the price of a stock will increase during that day.

The need for work experience – It is no secret that beginner day traders are oftentimes unsuccessful. This means that most of them end up losing money instead of making money. However, with some experience, traders can improve their chances in day trading.

Psychological difficulties with constant involvement in the market – Humans are very emotional beings. And unfortunately, our emotions aren't inherently built for stock trading. This means that emotions like greed and fear could sabotage you from making smart trades.

When Is Day Trading a Good Idea?

Although day trading involves a few difficulties and some risks, it could be extremely profitable if done right. Here are a few tips on how to increase your chances of success:

Gain some experience in the stock market before starting day trading – People who have experience in the stock market are more likely to gain profits than beginners. You can gain this experience by paper trading. This is when you use a simulator like the Webull Paper Trading Simulator to place your trades with fake money instead of using a real exchange.

Only risk the money you can afford to lose – There’s nothing worse than putting it all in and losing it all. Only take small risks that you are confident in. Professionals never risk more than 1%-2% of their capital.

Do not trade with high leverage – Using the broker’s money because they offer leverage could increase profits, but even more importantly, losses.

Choose the right broker – Day traders often face high brokerage costs, so choose the right broker and develop a maintainable trading strategy with good risk management.

How to Start Day Trading in 5 Steps

Step 1. Choose Your Broker

Let's make this clear: Not all brokers are created the same. Here are a few things you should pay attention to when choosing your broker:

The trading platform – A trading platform is software that allows you to trade: open, close, and manage market positions through an online broker. Trading platforms frequently provide additional services such as real-time quotes, charting tools, news feeds, and even professional research. Platforms can also be customized for specific markets, such as stocks, currencies, and others.

Low commission – At the end of the day, online brokers have to make money as well. This is why you have to pay commissions or fees with some online brokers every time you buy and sell, no matter if you make profits or not. So, it is a good idea to look out for that before choosing your broker because the fees and commissions differ from broker to broker. On the flip side, there are online brokers which do not take fees or commissions from their users.

Large variety of tradable assets – A lot of traders like to invest in multiple assets at the same time, which is why you should consider choosing a broker that offers a large variety of assets like stocks, bonds, ETFs, CFDs, crypto.

Step 2. Open an Account

To open an account with an online broker, you must usually present proof of identification as well as proof of domicile and answer a few other questions.

Webull may be the broker for you if you would like no commissions, prolonged trading hours, IRAs, and good software. It also gives out free stocks in exchange for certain actions, such as making a deposit. Here's how to get going:

1

Go to Webull.com and click on the Sign-Up button, or download the Webull app on your device. It is available on Android and IOS devices as well. The process of creating an account on Webull is similar on the computer and mobile devices.

2

You have the option to sign up using either your email address or your phone number. Choose one and continue.

3

Now, you will go to the application process itself where you will have to provide the standard information any broker would ask when creating a trading account. After you do that, your account application is submitted.

4

New accounts are approved within 1-2 business days. Once your account is approved, you will be notified by email.

5

Once your account is approved, you could make a deposit. You have to deposit at least $100 to receive two free stocks.

6

Congratulations! Now you can use Webull to trade. Good luck!

Webull Review

Webull Review

Step 3. Test Your Ideas on a Paper Trading Account

Like we mentioned above, a paper trade is a hypothetical trade that allows investors to experiment with buying and selling without putting their real money on the line. It allows them to try new strategies and see how they could perform. Webull offers its users this feature along with actual trading.

To use paper trading on Webull you have to:

1

Search for “Paper Trade” in the menu.

2

On the paper trading page, select "Trade."

3

Look for the name or symbol of the stock you want to trade.

4

At the bottom, choose "Paper Trade."

5

Place the order after entering the size, order type, quantity, price, and time-in-force.

Step 4. Fund your account

Everybody knows that if they want to start trading, they must have funds in their brokerage account. Webull gives you two free stocks if you fund your account with at least $100 on your first deposit. Here’s how to fund your Webull account:

1

Click on the “Deposit” option.

2

Tap on the “Make Your First Deposit” button.

3

Choose one of the two options for funding your account. They are ACH and Wire.

4

As far as verifying your bank account, you have two different ways. You could choose Real-Time Verification or Micro-Deposit Verification, which takes about 1-2 business days.

5

After that, choose your bank from the list of shown banks, but if you don’t see your bank, don’t worry, click “More Banks” and search for your bank.

6

Enter your username and password for internet banking.

7

Select the account you want to link.

8

Log in to Webull and select "Deposit."

9

Type in the amount you'd like to deposit. Remember, if you deposit at least $100 your first deposit, you get two free stocks.

10

Send in your deposit request and wait for it to be processed. It takes five trading days for every ACH transfer to be completed. We'll add preliminary capital to your account as purchasing power so you can begin trading until your funds are fully settled.

Step 5. Research the Market

When you're beginning almost anything, it's almost always a terrible idea to take on the most dangerous tasks first. Due to their unfamiliarity and the great risk of losing their money quickly, it's not a good idea for a beginner to begin with high leverage.

Another good idea is to start your trading experience by trading liquid stocks with moderate volatility, which allows you to minimize the risk of losing large amounts of money. A liquid stock is one that trades sufficient shares to allow the investor to effortlessly sell when they want. Because there are enough shares to satisfy the demands from both buyers and sellers, liquid stocks have lower volatility. Liquid stocks are less expensive to buy and sell.

Every day, you must perform research to identify stocks that offer potential ideas for your trading strategy. Remember, you have no guarantees that the stocks you buy will necessarily go up in price, but if you do research every day, you will find stocks that have a higher probability of increasing their price.

How to Choose Your Day Trading Strategy

All successful or experienced day traders use certain strategies when they are trading stocks. They are not buying random stocks in random quantities. Before we get into the exact strategies, here are a few easy tips for getting started:

Start with a demo account – A demo account is a highly recommended tool for any beginner and the ideal spot for experienced traders to backtest or experiment with new or enhanced methods. Many demo accounts are free and do not have any restrictions.

Manage your money – Sit down and decide how much money you're ready to risk before you begin. Please remember that most successful traders will never risk more than 1%-2% of their money on a single trade. If you want to be around when the wins start coming in, you must be prepared to lose some money.

Manage your time – If you merely trade for an hour or two a day, don't expect to make a lot of money. You must keep an eye on the markets and look out for new trading possibilities at all times. Day trading is a full-time job, not a part-time job.

Stay informed – Having a thorough understanding of the market is just not enough; you must also stay up to date. Keep up with market news and other events that may have an influence on your investment, such as a change in economic policy. There are numerous online economic and business tools available to keep you informed.

Those are a few essential tips that beginner day traders should keep in mind. Here are a few strategies that you can start implementing today:

News trading – You may already be aware that stocks react swiftly to the news. The good news about a company makes its stocks go up in price, bad news makes them go down in price. This technique is based on relying on news publications and spotting significant developing actions with the help of big volume. Every day, at minimum one stock jumps 20-30%, so there's plenty of chance of discovering one of those. Just hold your stock until signs of shifting appear, and then sell it.

Momentum trading – An investor who uses a momentum strategy buys a stock whose price is rising. Momentum stocks are uncommon and difficult to come by; on any single day, only approximately 10 out of 5,000 stocks will meet the conditions.

The scalping strategyScalping is one of the most effective day-trading tactics for experienced traders who can make good decisions and execute without hesitation. Scalping practitioners have the determination to sell soon if they see a price fall, hence limiting losses. This isn't a day-trading method for you if you're easily carried away and lack sharp focus. The scalping strategy is based on the idea that small wins could add up to a lot of money at the end of the day.

The pullback strategy – A pullback is a slowdown or small dip in the price of a stock or commodity that occurs within an ongoing advance. Traders see them as buying opportunities before the price rises again. The phrase "pullback" refers to price declines that last for a short period, a few successive sessions before the rise restarts.

Breakout trading – When the price is increasing above the previous high barrier price, it is called a breakout. However, it's not as simple as looking at a chart, identifying barriers, and then purchasing when the price breaks through. You should pay attention to the stock trading volume or how many shares are traded. This is because high-volume breakout trades are much more likely to be sustainable at the latest higher price than low-volume breakouts. Breakouts with smaller volumes are much more likely to fall below previous resistance levels, making profiting more challenging.

Breakout Trading Example

Breakout Trading Example

How Much Money Do I Need to Start Day Trading?

Let’s make one thing clear; you need money to make money in general. Day trading is not the exception. The only difference is that you need a lot of money to start day trading. In the US, there are day trading restrictions imposed by FINRA (Financial Industry Regulatory Authority). According to these restrictions, you must have at least 25,000 dollars in your account balance to be able to day trade.

The only way you could do some type of day trading without having 25,000 dollars in your account balance is to make no more than three-day trades in a rolling five-day period. This means that if you make three-day trades on Monday, you won’t be able to make any more day trades until the next Monday.

If your account balance drops below 25,000 dollars, you have to make a deposit to bring it back to 25,000 dollars.

Can I Day Trade For a Living?

As we previously specified in this article, income is not guaranteed in day trading. However, if you are serious about what you are doing, you could make a nice profit.

Of course, some people do day trading for a living, and they are pretty successful. It is very difficult for us to tell you exact numbers of what an average day trader makes, but certain statistics say that the numbers could be around $50-$200 per day, maybe more, maybe less.

Not everyone who starts day trading continues to do it for the long-term though, which is why certain statistics say that only 11-25% of them continue to do it long-term.

Best Day Trading Platforms

Remember earlier when we told you how to choose your online broker, we told you that you should pay attention to the trading platform that it uses. Now, let us tell you what some of the best trading platforms are:

1. Webull - Best for stocks and options

Webull holds the first position in our best brokers rating in 2023 with a 9,6/10 rating. What makes Webull so great is that it offers low costs, advanced tools, and it is easy to use for beginners.

2. Binance - Best for cryptocurrencies

Open an account
Your capital is at risk.

Binance is one of the best cryptocurrency exchange platforms, offering hundreds of cryptocurrencies as well as extensive tools for seasoned investors. Its advantages are low costs and a wide choice of cryptocurrencies.

3. IG - Best for Forex

IG is considered one of the best Forex trading platforms because it offers low Forex trading costs, a professional teaching part, a wide range of stock exchanges, and excellent research.

Summary

We hope that you have found this article informative and you enjoyed reading it. Hopefully, you have found the answer to some of the questions you had about day trading.

Remember, if you are serious about what you do, your chances of having a successful day trading career increase a lot. More important than what we taught you in this article is the number one rule of trading, and it is this: Don’t lose money.

FAQs

Could everyone be successful at day trading?

Unfortunately, as statistics show, not everyone could be successful at it.

Is it possible to make money through day trading?

Yes, it is possible to make more through day trading. But to do that, you must have experience in trading and have the ability to make the right decisions consistently.

Is it hard to start day trading?

No, it is not too hard to start day trading. All you need is a brokerage account and $25,000 in your account balance.

Why are US day traders required to have at least $25,000 in their account balance?

The purpose of this rule is to stop inexperienced traders from making dumb decisions with their money.

Team that worked on the article

Ivan Andriyenko
Author at Traders Union

Ivan Andriyenko is a financial expert and analyst. He specializes in trading in the Forex, stock and cryptocurrency markets. His preferred trading style is conservative strategies with low or medium risk, medium and long-term investments. He has 7 years of experience in the financial markets. Ivan is involved in preparation of articles for novice traders, and also of the reviews and evaluation of brokers, analyzing their reliability, trading conditions and peculiarities.

Ivan continuously tests new strategies for various assets, choosing the most effective options. In addition, he believes that helping novice traders is an important aspect of work. He shares information that beginners require – educational materials, strategies.

Ivan’s motto: continuous studying and experimentation lead to success.

Rinat Gismatullin
Author and business expert

Rinat Gismatullin is an entrepreneur and a business expert with 9 years of experience in trading. He focuses on long-term investing, but also uses intraday trading. He is a private consultant on investing in digital assets and personal finance. Rinat holds two degrees in Economy and Linguistics.

Gismatullin has been an author at Traders Union since 2019. His focus is creation of detailed reviews of brokerage companies and cryptocurrency exchanges, as well as analytical and educational articles on finance.

Rinat’s motto: Always be open to new experiments. By overcoming the hardships you will reach the stars that open to those who seek.

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.