STOCK DAY TRADING
Overview
Buy and sell stocks within the same market session, closing all positions by 4:00 PM to avoid overnight risk. Day traders exploit intraday momentum, news-driven moves, and technical setups. Requires pattern-day-trader account ($25,000 minimum) and strict discipline.
Setup
- 1.Set up a direct-access broker with Level 2 quotes and fast order execution.
- 2.Define your playbook: 2-3 specific patterns you trade (gap and go, opening range breakout, VWAP reclaim).
- 3.Create a daily watchlist pre-market based on overnight news, gap scanners, and high-relative-volume stocks.
- 4.Never risk more than 0.5-1% of account on a single trade — day trading requires many attempts.
- 5.Implement a hard daily loss limit — stop trading for the day when reached (2-3% is typical).
Max profit
Varies — consistent day traders target 0.5-2% daily account return. Exceptional days can be much larger.
Max loss
Defined by daily loss limit (protect capital above all else). Without discipline, losses compound rapidly.
Breakeven
Entry price plus commissions — commission costs are significant for high-frequency traders.
When to use
During high-volatility periods with strong sector trends, big earnings movers, or macro catalysts that create intraday trends. Best in morning sessions (9:30-11:30 AM ET).
When to avoid
Never trade with money you can't afford to lose. Studies show most retail day traders lose money — ensure you have 6-12 months of profitable paper trading before using real capital.