Day trading is a phrase thrown around often today, and the process is rich with advantages that have created many lucrative careers. With this guide to the day trading basics, you can discover if day trading is right for you.

What Is Day Trading?

Day trading is a fast-paced form of buying and selling assets. During the trading day, a trader buys and sells assets based on price fluctuations to create gains. This process requires an in-depth analysis of previous price movements, trading patterns and other factors that can impact an asset’s price.

A traditional approach to the stock market is to buy low and sell high, but day traders have a different goal. Rather than focusing on the value of a security, a day trader focuses on the potential gains. For example, a share may be worth $20, potentially increasing to $20.06 within the day. In this case, the day trader sees that 6-cent gain as an opportunity when multiple shares are purchased.

At one time, day trading was only available to big players in the financial industry, like banks, brokerages and trading houses. People would stay connected to stock market activity through ticker tape, and sales were often managed over the phone. The internet transformed access to the process, and now day trading can be a lucrative career for anyone with the resources to get involved.

Day Trading Strategies

Day trading relies on strategies that work with patterns in the market. While you can create your own strategies, there are many existing methods that day traders rely on, including:

  • News trading: This strategy focuses on the volatility of asset prices surrounding major news events or headlines. For example, news of a major acquisition could encourage a sale or purchase.
  • Range trading: In this strategy, a trader identifies a price range they buy and sell at. For example, an asset might sell for $50, and it’s expected to rise to $55. These become the buying and selling targets for that asset. This strategy applies to securities that appear to have similar highs and lows over an extended period of time, making it possible for traders to establish a peak in price.
  • Momentum trading: A trader will buy assets that are rising in price and sell when they believe the asset has peaked in price. This strategy requires an in-depth understanding of market behaviors to capitalize on brief stints of momentum.
  • Scalping: When a day trader uses the scalping strategy, they focus on various temporary price changes that occur throughout the day to create gains. There are many types of scalping, such as arbitrage, where a trader corrects perceived mispricing in that market for gains.
  • Pullback trading: Many assets trend upward in value but experience brief dips in the process. The pullback strategy counts on these dips to buy securities that will sell for a higher price later in the day.

The Pros of Day Trading

Why start day trading? Some of the advantages include:

The Pros of Day Trading

  • Work for yourself: One of the biggest draws of day trading is being your own boss, and it doesn’t come with the same responsibilities as owning and growing a business. You have the flexibility to engage in trading as a side gig, but it can become a full-time job if you sharpen your skills and generate gains. Plus, handle your day trading activities from the comfort of your home — no commute to an office required.
  • Enjoy instant results: Day trading is a rapid process, as you can buy and sell any number of assets in a given day. The advantage of this fast pace is getting to see the results of your choices immediately. When you sell an asset, you can create gains within the same day.
  • Choose your strategy: If you enjoy strategy and analysis, day trading is an excellent way to employ your skills. With many strategies to choose from, day trading allows you to choose how you generate gains and gives you the chance to try different strategies in different scenarios.
  • Experience high gain potential: Day trading essentially focuses on making small gains from buying and selling assets. While one asset may lead to a small gain, multiple assets can build to significant gains in a single day. Keep your gains higher than your losses throughout the day, and you can see some impressive earnings.

The Cons of Day Trading

While day trading offers many benefits, it’s valuable to be mindful of the drawbacks:

  • High risk: Day trading aligns with the adage, “high risk, high reward.” Despite the potential for high gains, you can experience significant losses, too. You have to be willing to accept this risk if you’re interested in day trading.
  • Time investment: You must be ready for a time commitment when you start day trading. You’ll have to dedicate hours to watching the stock market, researching assets and staying focused. The stock market moves quickly, and a difference of minutes can change the outcome of your trade.

How to Start Day Trading

If day trading is of interest to you, here are a few things you need to get started:

  • Familiarize yourself with the marketplace: When dealing with the stock market daily, you need to know the terms and the analysis strategies used to understand market behaviors. This initial education period will be an excellent springboard for day trading.
  • Find your strategy: While you can make your own strategy or jump between different strategies, it’s helpful to start with one that’s already tried and true. Review the strategies out there and find one that speaks to you. From there, you’ll want to get familiar with the ins and outs of that strategy and how to best apply it.
  • Work with a virtual prop trading firm: In day trading, virtual proprietary (prop) firms are companies that trade on behalf of their clients and use their own funds or virtual funds, which can help you create more gains than with your own resources. Working with one of these firms like SurgeTrader can be a great way to level up your day trading career.

Start Virtual Prop Trading With SurgeTrader Today

SurgeTrader is a virtual trading prop firm that can boost your access to the marketplace. With access to virtual funds, you can showcase your strategies and become a day trader. Our straightforward process helps you get started as soon as possible. Take the SurgeTrader Audition and join our trading community today.

Start Virtual Prop Trading With SurgeTrader Today