What’s the best time of day to day trade?

The first hour after the market opens (9:30 to 10:30 a.m. ET) often sees the most volatility and opportunities.

How much money do I need to start day trading?

Technically, you can start with just a few hundred dollars. But for full access in a margin account, you’ll need $25,000 to meet the pattern day trader rule (FINRA).

Can I day trade with a small amount of money?

Yes, many platforms offer fractional shares. Just be mindful of limits on trade frequency and leverage.

What’s the difference between day trading and swing trading?

Day trading: You buy and sell on the same day. Swing trading: You hold positions for a few days or weeks.

How can I improve my day trading skills?

Practice, study patterns, journal your trades, and most importantly, manage your emotions.

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How to Day Trade: Step-by-Step Tips for Beginners

August 4, 2025

6 min Read

Written by Daria Uhlig

Edited by Joe Evans

Excited man celebrating a stock market win while trading at a computer, representing active investing or day trading.

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Ever wondered how to day trade and whether it’s something you could actually start doing? You’re not alone. With the rise of user-friendly trading apps and social media buzz around quick profits, more people than ever are diving into day trading.

Day trading is all about buying and selling stocks or other financial assets within a single day, with the goal of making a profit from short-term price movements. But while it can look like easy money from the outside, successful day trading takes planning, discipline, and a whole lot of learning.

Whether you’re curious or ready to jump in, this guide breaks down everything you need to know to get started.

What Is Day Trading?

At its core, day trading means opening and closing a trade within the same day, usually within hours or even minutes. Unlike long-term investors, day traders don’t care about holding onto an asset for months. Their goal is to make fast, small gains by riding intraday price swings.

The Basics of Day Trading

Before you jump in, it helps to understand the basics:

Markets You Can Trade In

Stocks: Popular with beginners
Options: More complex, but high reward potential
Forex (currencies): 24-hour market, very liquid
Cryptocurrency: High volatility and 24/7 access

What Makes Day Trading Different?

Fast-paced: Trades are opened and closed on the same day
Volume-focused: Traders rely on high liquidity to get in and out quickly
Time-sensitive: Some traders hold positions for only minutes

Key Tools for Day Trading

To day trade effectively, you’ll need more than just luck — you’ll need the right tools:

Trading Platform: Use apps like E*TRADE, Robinhood, Webull or Thinkorswim.
Charts and Graphs: These help you track price trends and patterns.
Technical Indicators: Tools like RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence) and Bollinger Bands can help you spot trading signals.

Pro Tip: According to a FINRA study, 73% of retail investors say chart patterns are critical to their decision-making process.

How To Pick Stocks for Day Trading

Not every stock is a good fit for day trading. Here’s what to look for:

High liquidity: You need to be able to buy and sell fast. Look for stocks that trade millions of shares a day, like NVDA, TSLA or AMZN.
Volatility: Prices that move up and down throughout the day present more trading opportunities.
Market catalysts: Earnings reports, economic data or breaking news can drive intraday price action.

Example: When Tesla announces earnings, its stock might swing 5 to 10% within hours — ideal for a day trader.

Understanding the Risks of Day Trading

It’s not all green candles and fast profits. Only about 1% of day traders consistently make money net of fees and expenses, according to a comprehensive analysis by the North American Securities Administrators Association (NASAA).

Here are the risks you should know:

It’s easy to lose money. According to the U.S. SEC, the vast majority of day traders lose money over time.
Emotional decisions hurt performance. Fear and greed often lead to bad trades.
It’s time-consuming. You need to monitor the markets closely and stay sharp.

Risk Tip: Many pros use stop-loss orders to cap potential losses on every trade.

Setting Up Your Day Trading Account

To get started, you’ll need a brokerage account. Here’s what to know:

Pick the right broker: Look for low fees, fast execution and advanced tools.
Minimum deposit: U.S. pattern day traders must maintain at least $25,000 in their margin account.
Fund the account: Once approved, transfer funds and you’re ready to go.

Heads up: Some brokers allow beginners to start with less than $1,000 — but your access to margin and trade types may be limited. The SEC warns that pattern day traders must maintain a minimum of $25,000 in their brokerage account if using margin, or they’ll be restricted from trading.

How to Create a Day Trading Strategy

A solid plan can mean the difference between profit and loss. Here’s how to build yours:

Set clear goals: Know how much you want to risk and what return you’re aiming for.
Choose a style: Will you scalp (lots of tiny trades) or trend-follow (wait for a breakout)?
Use paper trading: Practice with virtual money before going live.
Backtest your strategy: Use historical data to see how your strategy would’ve performed.

Many brokers, like TD Ameritrade and Webull, offer free paper trading platforms.

Managing Your Day Trading Portfolio

Even short-term traders need to manage their money wisely. Keep in mind:

Diversify trades: Don’t go all-in on one stock.
Track everything: Use a trading journal or spreadsheet.
Stay organized: Save copies of trade confirmations and keep records for taxes.

The IRS considers gains from day trading to be taxable income, so detailed record-keeping is key.

Common Day Trading Mistakes to Avoid

Don’t let avoidable missteps drain your profits. Watch out for these beginner traps:

Chasing losses: Trying to recover losses quickly can make things worse.
Overtrading: More trades = more fees and more chances to make mistakes.
Skipping risk management: Never trade without knowing where your stop-loss is.

It’s also worth noting that emotional decision-making leads to poor performance in 84% of traders who don’t use a structured plan, according to behavioral finance research from the CFA Institute.

Final Take to GO: Should You Try Day Trading?

Day trading can be exciting and, at times, rewarding — but it’s not easy money. Roughly 80% to 95% of day traders lose money, according to financial experts, and success takes education, patience and discipline.

If you’re ready to put in the time to learn the craft, manage risk wisely and avoid emotional pitfalls, it may be worth exploring.

Want to learn more about trading, investing, and building wealth the smart way? Check out GoBankingRates’ Beginner’s Guide to Investing and explore more tips to grow your money with confidence.

FAQs

Here are the answers to some of the most frequently asked questions about day trading and how exactly it works:

What’s the best time of day to day trade?
- The first hour after the market opens (9:30 to 10:30 a.m. ET) often sees the most volatility and opportunities.
How much money do I need to start day trading?
- Technically, you can start with just a few hundred dollars. But for full access in a margin account, you’ll need $25,000 to meet the pattern day trader rule (FINRA).
Can I day trade with a small amount of money?
- Yes, many platforms offer fractional shares. Just be mindful of limits on trade frequency and leverage.
What’s the difference between day trading and swing trading?
- Day trading: You buy and sell on the same day.
- Swing trading: You hold positions for a few days or weeks.
How can I improve my day trading skills?
- Practice, study patterns, journal your trades, and most importantly, manage your emotions.

Data is accurate as of August 4, 2025, and is subject to change.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.