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How To Day Trade

Earn a profit as a day trader by learning to forecast daily stock price fluctuations and buy and sell stocks before the market closes.


  • Step 1: Apply a risk management strategy by determining how much you can risk on any one trade. Place a "stop-loss" order at the price level that suits your risk tolerance.
  • Step 2: Select a price target strategy. "Scalping," or selling almost immediately after a trade becomes profitable, and "Daily pivot buying," or purchasing at the LOD and selling at the HOD, are two price target examples.
  • TIP: Set a maximum loss per day that you can withstand, both financially and mentally. Stop when you hit your maximum.
  • Step 3: Evaluate your trading performance to assess your earnings and to judge how well you adhere to your trading strategy. Use losses as opportunities to identify problems and ways to solve them.
  • FACT: Did you know? Under New York Stock Exchange rules, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
  • Step 4: Determine whether an actual turnaround is happening in a stock price by looking for volume spikes and any precedents for current movements in previous low of day – LOD – or high of day – HOD – prices.
  • TIP: Be wary of junk e-mail that contains "hot tips." These messages may entice you to buy junk stocks or even release personal information.
  • TIP: Ensure a diversified portfolio, including shares in bonds and mutual funds, to shield you in case one sector bombs.
  • Step 5: Fund your trading account with an adequate amount for your trading style.
  • Step 6: Look for stocks with a high amount of liquidity, which permits a stock to be bought and sold with a minimal loss in value.
  • Step 7: Gauge a stock's volatility, which is the expected daily price range. More volatility equals a greater profit – or a bigger loss.
  • Step 8: Identify upward stock trends as early as possible by using a combination of information sources, such as a real-time financial news wire, business and financial media outlets, professional stock analysis sites, and advice from brokers or trading coaches.
  • Step 9: Learn all you can about the stock market, prudent risk management techniques for your account size, and effective stock entry and exit methods before wagering your earnings.

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