What Is Day Trading and Here’s How Day Trading Works?


It is not tough to get intrigued by the idea of turning back the quick profits in the stock market. Trading today makes nearly no one rich, and many people also end up losing money. But you don’t always have to lose money. So if you are interested in trying your hands out of the online trading platform, you can consider this guide to know more about the day trading platform.

How to begin day trading

If you want to start day trading, then search for the best day trading platform online. Any online websites will help you with online broker comparison rates to choose the best one. There are many tricks and tips to help maximize your day trading or short selling profits, but these three points must be marked important if you want to manage the substantial risks:

  • Trading money you can afford if you lose: You must set a specific amount aside and forget about it if you are going for a day trading platform. Please do not make the trade of more than the amount you cannot afford or do not even rent or mortgage money because there is always a possibility of losing it.
  • Small amounts are better: You can be with small amounts so that you can save yourself from significant losses even if you commit any error. Also, make sure to keep track of all the online trading platforms for better insight.
  • Never quit your permanent job: Even if short selling might seem intriguing to you, never opt for quitting your daily job because you never know when luck will stop working. There are also options like Robinhood short selling that you can choose.

Best day trading securities

First, if you want to begin with day trading, search for the most authentic online day trading platform. You can then choose the type of securities you will sell and buy. You can also day trade bonds, commodities, and currencies. Here are some of the best day trading platform characteristics:

  • Better volume: It is common among day traders to like stocks as they are a liquid asset. It means that they can trade it in high volumes. Liquidity also allows the traders to sell and buy without much affecting the price. The currency markets are usually of high liquidity.
  • Volatile is good but not much: The meaning of volatility in online trading software means the frequent change in the price of the security. This type of movement is essential for a day trading platform if you want to make profits.
  • Understandability: If you want quick and understandable knowledge about how security trades and what ends up triggering the moves, trading software will help you understand. 

Strategize day trading

After you decide on the securities to trade, you are required to determine the best trading strategy to maximize the chance of trading profitably. Here are some of the typical strategy you can mix and match:

  • Range, swing, or Trading: Here, traders need to find the stock that bounces around between high and low prices. This is also called ‘range-bound’ stock.
  • Fading: It means a trader who is trying short selling the stock, and it has gone up too quickly. 
  • Following Momentum or trend: The strategy tries to ride a stock wave that moves either down or up.
  • Spread trading: The technique tries to profit on temporary changes in exploiting. It means understanding the sentiment and the difference in the bid-ask price for a stock that is also termed as the spread.

Best time for day trading

Day trading requires volatility and liquidity. The stock market also offers them who are most frequent in the hours when it opens from 9.30 am to about noon ET. The last hour of trading closes at 4 pm. A day trader can make 100 to a few hundred trades each day, and it depends on the strategy about how frequently attractive the costs seem to appear. 

Risk management for day trading

The given above ground rules will help you to avoid some big challenges in day trading. But something essential is that it helps to manage smaller risks too. Risk management is all about limiting the downside and the amount you can end up losing on any one trade. When you are trying to consider risks, here are the following issues to take care of:

  • Portfolio percentage
  • Loss
  • Sales
  • Position sizing

Learning day trading the best way

If you are not ready to be a regular player, you can always try for some stock market simulators. The paper trade involves simulated stock trades that allow you to see how the market works before you risk any real money. The paper trade accounts are available, and you can make an online broker comparison. You can also get the broker’s functionality and platform’s proper effects if you go on with this approach.