Free Day Trading Guide 2024: Step By Step

There are many ways to get active in the stock market, and it’s not just saved for professional money managers on Wall Street anymore. 

While there is a lot of potential that can come from day trading, knowing the basics about the markets and how to craft a winning trading strategy aren’t always that simple. Especially if you’re new to the space, you need to take some time to learn the forces at play in the markets and understand the risks that you’ll face as a day trader. 

So, continue reading through this guide as we provide you with some beginner tips for day trading, and how you can get started on your own today. 

What Is Day Trading?

Let’s begin by explaining what day trading is in a little more detail before we dive into the specific trading strategy options you can choose from. 

The term day trading is pretty self-explanatory–it’s a trading strategy you utilize within one trading day. This means you will buy and sell securities on the same day, even within minutes or seconds sometimes. 

Losing money is always a risk with day trading, as with other types of investing. 

How Does Day Trading Work?

Day trading is very different from traditional trading strategies, which is something you’ll need to know if you want to be a successful day trader. 

Experienced traders recognize that there is price volatility within one day of trading, not just over weeks, months, or years. So, day traders aim to capture these short-term price fluctuations and generate day trading profits each day. 

Day trading is commonly done in the stock market and forex markets, so day traders closely watch the price movements in these two markets and utilize technical analysis to time their traders accordingly and avoid losing money if possible. 

Due to the nature of day trading, many day traders will utilize leverage, or borrowed funds from day trading brokers, in order to execute their trades on a day trading platform. This requires a sophisticated form of risk management though so the day traders don’t become overleveraged when their trades lose money and they have to square up with their brokers. 

Additionally, trading on market news is a popular strategy in the day trading world, which often leads to short-term price swings that day traders can take advantage of. 

Pros & Cons Of Day Trading

Now that you know a little bit more about day trading and how it works, let’s lay out some of the pros and cons of this type of strategy. 

Pros: 

To begin with, there is a way to make day trading stocks into your full-time job, which is what many day traders aspire to. This is risky, and not achievable for everyone, though it is a possibility for a profitable day trader to achieve this financial freedom.  

Additionally, there are multiple strategies that successful day traders can employ, which makes it a flexible approach to trading that lets you appeal to your strengths. So whether you want to start buying and selling based off an earnings report, or you’re more tech-savvy with indicators and software programs, there is a way to make money as a day trader in a number of ways. 

Another pro of day trading is that day traders do not face any overnight risk. Since all the buying and selling of day trading is done within one trading day, all trades will be closed out at the end of the day, so traders don’t have to worry about what’s happening to their funds overnight. 

Cons: 

On the other hand, there are some risks involved with learning how to day trade that you should be aware of. Building a well-thought-out strategy doesn’t just happen overnight, so successful traders often put in hours of work studying the markets, watching for price moves and building their own strategy before they start raking in the profits. 

With this in mind, many day traders will often lose money when they’re just starting out before they become market makers and start trading profitably. 

The US Securities and Exchange Commission has laid out some risks of day trading, which are important to be aware of before you begin, which include the fact that it can be a very stressful career path, many day traders will borrow money through a margin account in order to execute their strategies, and that new traders shouldn’t expect to break the bank with just a few day trades.  

How To Day Trade?

Now that you’ve seen some of the pros and cons that day traders face, let’s go over some of the strategies and approaches you can take when day trading. 

Technical Analysis

To begin, one of the main approaches of day traders is to rely on technical analysis. This gives traders an objective way to base their trading decisions, and will often require the day trader to know how to read charts and indicators in order to recognize market opportunities. 

Fundamental Analysis

Another approach that day traders can use to day trade stocks is fundamental analysis. This is when they analyze the stock price versus what the underlying asset is worth. This helps a day trader determine whether the security is over or undervalued, which can mean they should buy or sell the asset accordingly. 

This will require the trader to understand the fundamentals of the markets, how to value a company, and other aspects in order to be successful.  

Chart Patterns Analysis

There are many charts out there that a day trader can analyze in order to make day trades. Aspiring day traders should understand what the charts indicate, and some of their shortcomings before fully relying on them for their strategies. 

Charts can be helpful, though there are some pitfalls that you can get into if you don’t understand the market forces and fundamentals at play behind them. 

Candle-Stick Patterns Analysis

Candlestick patterns are a type of chart that will show you the trading highs and lows of an asset during a given period. This is a visual representation of price swings, which can be useful to a day trader who is swing trading, or a pattern day trader. 

Bullish patterns on a candlestick chart show that the price is likely to rise, and bearish patterns on the chart will show that the prices are likely to fall. So, candlestick charts can be very valuable to any stock trader, especially a pattern day trader. 

How Much Do You Need To Start Day Trading?

There is no right answer to how much you’ll need to start day trading. However, many brokers will require some sort of account minimum for you to get started, especially if you will be using leverage to day trade. So, check with the broker and trading platform you plan on utilizing in order to get a better idea. In many cases, this can be around a few thousand dollars as a minimum in order to open up an account. 

Aspects of Day Trading Strategies

Now we will go over some of the main aspects you should know about if you want to day trade. 

Risk Management

Day trading is risky, so you need to enter into it with a good risk management strategy in place. This can include how much you’re willing to lose each day, stop loss trades, and other tools in order to minimize your losses. 

Time management

Day trading can also require a lot of your time, meaning you’ll have to sit in front of your computer monitoring your trades, looking for new opportunities, and more within the business day period. So, many make day trading a full-time job in order to dedicate themselves to it, so know that this likely isn’t something you can just do for a few minutes each day. 

Day Trading Guide: 6 Basic Steps to Start Day Trading

We will recap this guide with the six basic steps you need to take in order to start your day trading journey. 

Choose a Reliable Platform

In order to day trade, you’ll need to get started with a broker and a trading platform. There are many options out there, though they are all not reliable and trustworthy. So, do your research to ensure you’re entrusting your money with a reputable platform. 

Register on Website

Once you’ve chosen a trading platform to utilize, you will need to register yourself on their site and make an account. This shouldn’t take too long, though each site will be different, and may require you to include your identification, tax information, and more for reporting and compliance purposes. 

Choose The Type of Asset

As we mentioned before, you can day trade a number of different assets, namely stocks and forex. You will need to select which asset type you will use for day trading. You will likely base this off of your own personal expertise, interest, and resources available to you in order to best set yourself up for success. But, be aware that you can always switch this up later if needed. 

Create Your Own Trading Strategy

You’ll also need to decide which strategy you’re going to implement. Again, this will be dependent on your own personal skills, expertise, experience, and resources. You can always learn more about different strategies and the markets, though it’s recommended to employ a strategy that you’re comfortable with and have the tools to manage adequately. 

Place Your Order

Once you have a strategy selected for yourself, and you’ve done the necessary background research in order to identify good trading opportunities, you can enter a trade with your chosen trading platform.

Remember, day trading occurs within one trading day. So, you will purchase stocks at some point in the day, and sell them before the market closes. 

Follow Your Strategy

Whether you’re choosing to trade in the stock markets or currency markets, you need to keep an eye on your trades throughout the day in order to time your exit properly. The timing of selling securities isn’t a super easy or straightforward task, so it will require traders to stay diligent with their trades and time future trades. 

Top 2 Day Trading Platform

eToro

eToro is a platform you can utilize for day trading. They have great copy-trading features as well, allowing you to copy the trades of other traders on their platform. eToro is preferred by users for its clean and intuitive interface, making it easy to use even for beginners. There are 3,000 assets you can trade on their platform, in addition to fantastic educational materials that are great for newcomers. 

TradeStation

Another platform to access the financial markets as a day trader is TradeStation. The nature of the platform makes it better suited to advanced and experienced traders, though they have recently moved to $0 commission trades, attracting many beginners as well. Their professional-looking platform hosts a variety of different assets including crypto, futures, and more for users to choose from.  

Conclusion

Day trading is quite involved–it can be very risky, and take up a lot of your time in order to be successful. By knowing what to expect when you get into this world, you can have a better chance of setting yourself up for success.

Frequently Asked Questions (FAQs)