Day Trading Guide For Getting Started
Aug 26
/
Otavio
More individuals are delving into day trading, lured by the promise of financial independence and the freedom to live by their own rules.
As part of my Day Trading Courses, I'll provide you with a deeper understanding of these tools and how I use them in my trading career. If you have any questions, don't hesitate to reach out to me at otavio@conquesttrader.com
As part of my Day Trading Courses, I'll provide you with a deeper understanding of these tools and how I use them in my trading career. If you have any questions, don't hesitate to reach out to me at otavio@conquesttrader.com
Understanding Day Trading
More individuals are jumping into day trading, lured by the promise of financial independence and the freedom to live by their own rules.
Day trading is essentially a speculative approach where you buy and sell within a single day. For instance, imagine buying shares at 10AM and selling them by 2PM – that's a day trade. But if you sell them the next morning, it’s not a day trade anymore.
Active traders, often referred to as day traders, rely heavily on technical analysis and strategies to profit within short timeframes, sometimes even leveraging margins for increased buying power. Importantly, a day trader doesn’t randomly select stocks. There's a systematic approach with set rules and guidelines to manage finances.
Day trading is essentially a speculative approach where you buy and sell within a single day. For instance, imagine buying shares at 10AM and selling them by 2PM – that's a day trade. But if you sell them the next morning, it’s not a day trade anymore.
Active traders, often referred to as day traders, rely heavily on technical analysis and strategies to profit within short timeframes, sometimes even leveraging margins for increased buying power. Importantly, a day trader doesn’t randomly select stocks. There's a systematic approach with set rules and guidelines to manage finances.
The Mechanics of Trading
The essence of day trading is leveraging short-term stock price fluctuations by actively buying and selling.
This makes risk management pivotal. Think of day traders as risk navigators. While they aim to grow their capital, poor risk management can lead to significant losses.
The objective? Capitalize on market volatility. Without these price changes, there’s no room to make a profit. Hence, the bigger the price shift, the greater the potential profit (or loss).
This makes risk management pivotal. Think of day traders as risk navigators. While they aim to grow their capital, poor risk management can lead to significant losses.
Pre-planned entry and exit points help eliminate emotions from the equation, ensuring decisions are strategic, not reactive.
Before Going After Those Profits, Ensure:
A Solid Grasp on Day Trading Jargon and Technical Analysis:
Having traded for several years, I can attest to day trading's complexity. It's analogous to playing a pro sport – consistent performance is key. Venturing without proper knowledge is a sure-shot way to lose money. Start with books, videos, and training courses. But remember, theory alone won’t make you a pro – practice will.
Practice on a Simulator:
Knowledge needs conversion into skill. Even if you’ve studied extensively, real-time trading is different. Simulators allow you to hone your strategy in a risk-free environment. If you can't profit in a simulator, a real account may be a harsher experience.
Having traded for several years, I can attest to day trading's complexity. It's analogous to playing a pro sport – consistent performance is key. Venturing without proper knowledge is a sure-shot way to lose money. Start with books, videos, and training courses. But remember, theory alone won’t make you a pro – practice will.
A Proven Day Trading Strategy:
It took me two years to perfect my strategy. As a newcomer, you can either adopt an existing strategy or develop your own. But remember, creating one requires rigorous backtesting and fine-tuning. For beginners, mastering a tried-and-tested strategy before innovating is advisable.
It took me two years to perfect my strategy. As a newcomer, you can either adopt an existing strategy or develop your own. But remember, creating one requires rigorous backtesting and fine-tuning. For beginners, mastering a tried-and-tested strategy before innovating is advisable.
Practice on a Simulator:
Knowledge needs conversion into skill. Even if you’ve studied extensively, real-time trading is different. Simulators allow you to hone your strategy in a risk-free environment. If you can't profit in a simulator, a real account may be a harsher experience.
Essential Tools for Trading
For your day trading journey, you'll need:
Selecting The Right Broker: Your broker is critical. They hold your funds and execute your trades. Different brokers cater to specific audiences – like Vanguard for passive investors, Tastytrade for options traders, and Lightspeed for day traders. For day traders, top choices include Mondeum Capital, LightSpeed, WeBull, and CMEG.
- An Online Broker: The intermediary for your trades. Ensure they offer quick executions and reasonable prices.
- Scanners: Vital to scan real-time market data.
- Charting Platform: For analyzing stock performances.
Selecting The Right Broker: Your broker is critical. They hold your funds and execute your trades. Different brokers cater to specific audiences – like Vanguard for passive investors, Tastytrade for options traders, and Lightspeed for day traders. For day traders, top choices include Mondeum Capital, LightSpeed, WeBull, and CMEG.
Consider trade execution speed, commission structures, and whether they offer direct market access (DMA).
Why Scanners Matter
Distinguish between stock scanners and stock screeners: scanners provide real-time data, while screeners offer static, often outdated lists. Day traders need scanners to identify 'stocks in play' – stocks with high relative volume and movement potential. Our top pick for scanners is Trade-Ideas for its reliability and customization options.
Charting Platform
Having a reliable and feature rich platform is great for visualizing price action and makes all the difference when making trade decisions. Unfortunately, a lot of brokers' platforms do not meet the demands of active traders. With that said, The charting software that comes pre-built into Sterling Trader Pro (my personal favorite software) and WeBull (the best free trading software) are phenomenal and have everything I need for trades.
Why Scanners Matter
Distinguish between stock scanners and stock screeners: scanners provide real-time data, while screeners offer static, often outdated lists. Day traders need scanners to identify 'stocks in play' – stocks with high relative volume and movement potential. Our top pick for scanners is Trade-Ideas for its reliability and customization options.
Charting Platform
Having a reliable and feature rich platform is great for visualizing price action and makes all the difference when making trade decisions. Unfortunately, a lot of brokers' platforms do not meet the demands of active traders. With that said, The charting software that comes pre-built into Sterling Trader Pro (my personal favorite software) and WeBull (the best free trading software) are phenomenal and have everything I need for trades.
Essential Tools For Trading
For your day trading journey, you'll need:
Selecting The Right Broker: Your broker is critical. They hold your funds and execute your trades. Different brokers cater to specific audiences – like Vanguard for passive investors, Tastytrade for options traders, and Lightspeed for day traders. For day traders, top choices include Mondeum Capital, LightSpeed, WeBull, and CMEG.
- An Online Broker: The intermediary for your trades. Ensure they offer quick executions and reasonable prices.
- Scanners: Vital to scan real-time market data.
- Charting Platform: For analyzing stock performances.
Selecting The Right Broker: Your broker is critical. They hold your funds and execute your trades. Different brokers cater to specific audiences – like Vanguard for passive investors, Tastytrade for options traders, and Lightspeed for day traders. For day traders, top choices include Mondeum Capital, LightSpeed, WeBull, and CMEG.
Consider trade execution speed, commission structures, and whether they offer direct market access (DMA).
Why Scanners Matter
Distinguish between stock scanners and stock screeners: scanners provide real-time data, while screeners offer static, often outdated lists. Day traders need scanners to identify 'stocks in play' – stocks with high relative volume and movement potential. Our top pick for scanners is Trade-Ideas for its reliability and customization options.
Why Scanners Matter
Distinguish between stock scanners and stock screeners: scanners provide real-time data, while screeners offer static, often outdated lists. Day traders need scanners to identify 'stocks in play' – stocks with high relative volume and movement potential. Our top pick for scanners is Trade-Ideas for its reliability and customization options.
How To Start Day Trading
Once you’ve learned a strategy and are trading it profitably in a simulator, you can now start to look at trading in a live account.
When you start day trading with real money, it's best to take it easy.
Don't rush and put all your money at risk right away. Start slow until you feel confident.
Trading with your own money can feel stressful and emotional.
This feeling lessens as you learn and trade more.
You surely don't want to lose all your money on your first day!Now, a big question: How much do you need to start day trading?
Here are the steps you will need to take:
- Open a brokerage account and transfer money in
- Have a written trading plan you can review every morning
- Make your watchlist in the morning
- Trade your plan and stick to it
- Review your trades at the end of the day
When you start day trading with real money, it's best to take it easy.
Don't rush and put all your money at risk right away. Start slow until you feel confident.
Trading with your own money can feel stressful and emotional.
This feeling lessens as you learn and trade more.
You surely don't want to lose all your money on your first day!Now, a big question: How much do you need to start day trading?
How Much Should You Start With?
Many people ask this.
Your starting amount depends on whether you want day trading to be your main job or just a small extra income.
I began with just $3,700 and in two years, I more than 100x it and turned into well over $400,000. This success is rare, and the average person isn't going to be able to achieve it.
The main thing is: you don’t need tons of money to start. When deciding your starting amount, consider:
For example, if you want to earn $100 daily and can invest $1,000, and you pick a stock costing $2.00/share, you can buy 500 shares. You'd need the stock to rise 20 cents/share to reach your goal. This is a basic example; there's more to consider, like margin, which lets you buy more with less money.
Your starting amount depends on whether you want day trading to be your main job or just a small extra income.
I began with just $3,700 and in two years, I more than 100x it and turned into well over $400,000. This success is rare, and the average person isn't going to be able to achieve it.
The main thing is: you don’t need tons of money to start. When deciding your starting amount, consider:
- How much are you looking to make per day?
- How much do you actually have to start day trading with?
For example, if you want to earn $100 daily and can invest $1,000, and you pick a stock costing $2.00/share, you can buy 500 shares. You'd need the stock to rise 20 cents/share to reach your goal. This is a basic example; there's more to consider, like margin, which lets you buy more with less money.
Trading Accounts:
Cash vs. Margin
With a cash account, you trade only with the money you have. Margin accounts let you borrow money from the broker to buy more shares.
Cash Accounts:
Margin Accounts:
Many traders prefer margin because it can boost profits. If you made $100 with a cash account, you could have made $400-$600 with a margin account. But remember, it's riskier.
Cash Accounts:
- Trade as often as you like, but wait two days for funds to settle.
- Trade only with your account's cash.
- Trading with unsettled money can get your account suspended.
Margin Accounts:
- If you have under $25k, you can make only 3 trades in 5 days.
- You can buy more than your account’s cash, thanks to leverage.
Many traders prefer margin because it can boost profits. If you made $100 with a cash account, you could have made $400-$600 with a margin account. But remember, it's riskier.
Understanding the PDT Rule for Margin Accounts
The main rule for day traders is the Pattern Day Trader (PDT) rule.
Here's what you should know:
The PDT rule started in 2001 after many traders lost money during the dotcom bubble. It means if you have less than $25,000, you're limited to three day trades in five days. If you break this rule, your account could be restricted.
Some traders use brokers outside the U.S., like TradeZero or CMEG, to bypass the PDT rule. Another option is day trading futures, which don't follow the PDT rule like stocks do.
This is how I was able to grow both of my small accounts so quickly!
Here's what you should know:
- PDT applies only to margin accounts.
- Making 4 day trades in 5 days labels you as a PDT.
- Once labeled PDT, keep $25,000 in your account to continue day trading.
- With $25,000, these rules don’t apply.
The PDT rule started in 2001 after many traders lost money during the dotcom bubble. It means if you have less than $25,000, you're limited to three day trades in five days. If you break this rule, your account could be restricted.
Some traders use brokers outside the U.S., like TradeZero or CMEG, to bypass the PDT rule. Another option is day trading futures, which don't follow the PDT rule like stocks do.
This is how I was able to grow both of my small accounts so quickly!
Profitable Traders Know How To Manage Risk
Imagine this: A trader successfully makes money in 9 trades. For every trade, he could either earn $100 or lose $50.
So, after 9 trades, he's made a profit of $900.But, on the 10th trade, when he starts to lose $50, he doesn't stop.
He buys more shares to lower his average cost. His losses increase to $100, but he still doesn't sell. Finally, he ends up losing $1,000.
What's the lesson?
Even if you win 90% of the time, one big mistake can cost you all your gains.
Sadly, this story is not uncommon. Many new traders make good profits on several small trades but then lose it all on one big trade. I've seen it, and I've experienced it.
Key Tips for Day Traders:
So, after 9 trades, he's made a profit of $900.But, on the 10th trade, when he starts to lose $50, he doesn't stop.
He buys more shares to lower his average cost. His losses increase to $100, but he still doesn't sell. Finally, he ends up losing $1,000.
What's the lesson?
Even if you win 90% of the time, one big mistake can cost you all your gains.
Sadly, this story is not uncommon. Many new traders make good profits on several small trades but then lose it all on one big trade. I've seen it, and I've experienced it.
Key Tips for Day Traders:
- Be Consistent: It's a bad idea to keep changing your plans during a trade. Set your limits, and then trust your plan.
- Know Your Limits: Always decide in advance how much you're willing to lose on a trade. Once you decide, stick to it.
- Play Safe: As a new trader, your first goal should be not to lose money. Once you get good at avoiding losses, then you can aim for bigger profits.
How Much Money Can Day Traders Make?
Well, it varies. Experienced traders can earn a lot, sometimes even millions a year. Highly skilled traders can make 7 figures a year while new traders that are profitable can be anywhere from $200-$500 a day.
The markets are open about 253 days per year so if you average $400 per day, that’s $101,200 a year. Not bad!
If you’re doing $1000 in profits a day, that’s $253,000 for the year!
I recently turned $3,000 into over $35,000 in 8 days of Day Trading for my small account challenge (and this was a 30-day challenge so be sure to check out my YouTube channel @Conquest_Trader to see the final result)!
How was I able to grow my account so quickly? First of all, I used an offshore account that allowed me to day trade on margin. They do not enforce the PDT rule. The broker is called CMEG.
Additionally, CMEG offers 4x leverage up to $2,500, and then 6x leverage above $2,500.
That means with a $500 cash balance, you have $500 x 4 = $2,000 in buying power.
With a $5,000 cash balance, you have $5000 x 6 = $30,000 in buying power.
Once the brokerage account was set up, I just needed to follow the rules of my strategy. My strategy allowed me to risk up to $300 on each trade I took.
On my first day, I made $517. I continued to increase my risk each day, as my account grew. Within three days of my challenge, I had doubled my account.
From there, it began steadily growing until the eighth day when I became extremely focused and disciplined for an hour and made over $18,000. This more than doubled my account and took me past the $35,000 mark.
Oh and by the way, I did all this only working 10-min to 1-hour a day. Not bad at all!
Now the only way you can double your account in 1-day as a day trader is by focusing on stocks that are moving quickly!
Keep in mind that you will have commissions, exchange fees, data fees, software fees, and taxes that will dip into your profits. For me, since I was making thousands a day, they were completely irrelevant to me.
The markets are open about 253 days per year so if you average $400 per day, that’s $101,200 a year. Not bad!
If you’re doing $1000 in profits a day, that’s $253,000 for the year!
I recently turned $3,000 into over $35,000 in 8 days of Day Trading for my small account challenge (and this was a 30-day challenge so be sure to check out my YouTube channel @Conquest_Trader to see the final result)!
How was I able to grow my account so quickly? First of all, I used an offshore account that allowed me to day trade on margin. They do not enforce the PDT rule. The broker is called CMEG.
Additionally, CMEG offers 4x leverage up to $2,500, and then 6x leverage above $2,500.
That means with a $500 cash balance, you have $500 x 4 = $2,000 in buying power.
With a $5,000 cash balance, you have $5000 x 6 = $30,000 in buying power.
Once the brokerage account was set up, I just needed to follow the rules of my strategy. My strategy allowed me to risk up to $300 on each trade I took.
On my first day, I made $517. I continued to increase my risk each day, as my account grew. Within three days of my challenge, I had doubled my account.
From there, it began steadily growing until the eighth day when I became extremely focused and disciplined for an hour and made over $18,000. This more than doubled my account and took me past the $35,000 mark.
Oh and by the way, I did all this only working 10-min to 1-hour a day. Not bad at all!
Now the only way you can double your account in 1-day as a day trader is by focusing on stocks that are moving quickly!
Keep in mind that you will have commissions, exchange fees, data fees, software fees, and taxes that will dip into your profits. For me, since I was making thousands a day, they were completely irrelevant to me.
So what's next??
This article should provide you with a good intro into the world of trading. But it's just that; an introduction. Do expect to read this and go make thousands every single day.
Fortunately for you, there's so many resources easily available to learn about trading the markets.
If you're ready to get serious about day trading, then make sure to check out our FREE classes for a look on how I find powerful opportunities everyday, build my strategies, and manage the risks in the market.
Click the button below to get full access!
Fortunately for you, there's so many resources easily available to learn about trading the markets.
If you're ready to get serious about day trading, then make sure to check out our FREE classes for a look on how I find powerful opportunities everyday, build my strategies, and manage the risks in the market.
Click the button below to get full access!
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