If you’re interested in how to day trade stocks then you are in the right place! This method of stock trading has been popularised by many of today’s billionaire hedge fund managers who started off their careers by day trading stocks.
With the rise of algorithmic trading robots – who control much of the flows in stock markets nowadays – the game has changed quite a bit. But, with the right trading tools, platforms and knowledge it is still possible to compete as a day trader in the stock market – after all, this is the strategy used by many of the world’s top proprietary trading floors.
In this ‘How to Day Trade Stocks – A Beginner’s Guide’ we cover how to pick stocks for day trading, five day trading strategies you can get started with today and the safest day trading platform to use with the best trading tools and fees.
How to Day Trade Stocks – 5 Quick Steps
If you’re eager to start day trading stocks today, then follow this quick five-step guide to do so.
- Step 1. Choose a stock trading platform – To start day trading stocks you need a top-notch trading platform. It doesn’t get any better than FCA regulated stockbroker eToro. You can open an account in minutes and start trading stocks with 0% commission.
- Step 2. Deposit – To speculate on the price direction of stocks you need capital to do so. With eToro, you can deposit funds fee-free using a variety of methods such as bank transfers, credit or debit cards and e-wallets such as PayPal. You only need $50 to get started.
- Step 3. Research the market – When trying to find the best stock to day trade, you need to have a broader understanding of what the overall stock market is doing. By researching the market you can identify which sectors are performing the best (energy, retail, financials, etc) to then select the best stock – we’ll show you how to do it below (hint: it’s in the eToro platform!).
- Step 4. Choose which stocks to trade – With eToro, there are thousands of stocks to trade on. To find stocks to day trade you will want to focus on your learnings from the broader market and then use a high probability trading strategy to identify entry and exit points. Five of these strategies are covered in more detail further in this guide.
- Step 5. Trade – When day trading volatile stocks speed is essential. This is where eToro’s trading ticket comes in handy. At the click of a button, you can buy stock with extra safety features such as a stop loss and take profit level. This means you can fully automate your day trades.
Your capital is at risk. 68% of retail investor accounts lose money when trading CFDs with this provider.
Where to Day Trade Stocks
Choosing the right brokerage and trading platform is essential to survive in the world of day trading. Not only should the platform be easy to use, fast and responsive it should also be safe and cost-effective.
The best day trading platforms should also provide you with extra tools and educational materials such as webinars and courses that can help you to learn how to day trade stocks properly and teach you how to day trade penny stocks.
Fortunately, you don’t need to spend hours trying to find the best day trading stockbroker as we’ve done the work for you and explain our findings below.
1. eToro – Overall Best Day Trading Stockbroker
eToro is by far one of the best brokers to day trade the stock market. It is authorised and regulated around the world by the UK FCA, CySEC, ASIC and FINRA providing a high level of safety and security.
You can buy stocks on eToro in real-time covering all sectors across all global stock markets in the US, UK, Europe and Asia. Furthermore, you can trade these stocks with 0% commission so more of your profits end up in your back pocket. eToro also gives its users access to the best dividend stocks and the most undervalued stocks.
You can also trade forex, indices, commodities and buy cryptos with low fees. Or you can use the platform to find the best penny stocks to day trade or stick to blue-chip stocks like Amazon or Microsoft.
The eToro platform and stock app is used by more than 20 million traders around the world. It is widely considered to be the world’s biggest social trading and copy trading platform. This means you can share and discuss trading ideas with other traders – a great way in finding stocks to day trade.
You can also view the performance of other day traders using customised filters set to your own preferences and risk tolerance. If you like the performance of a trader, you can have their exact trades copied onto your own account automatically.
This is a great way to build a passive income stream but also to learn more on how to day trade stocks as you can see how other profitable traders are doing it.
eToro also provides a great range of educational materials through its trading academy. This includes articles, webinars and courses. Furthermore, you can access expert analyst research from the top investment banks through the research section which can help you find good stocks to day trade today.
Better yet, you can get started with eToro with just $10 and open an account in just a few minutes. There is also a wide range of deposit options which are fee-free.
What we like:
- FCA, CySEC, ASIC, FINRA regulated
- 100% commission-free stock trading
- Easy to use web platform and mobile app
- Feature-rich with a great copy trading service
- Trade stock CFDs on margin from just $50
Your capital is at risk. 68% of retail investor accounts lose money when trading CFDs with this provider.
2. Webull – Top Rated Day Trading Stockbroker
Webull is another top-rated day trading stockbroker that launched in 2017. It has become one of the most popular trading platforms in the United States as you can buy stocks on thousands of US-listed companies 100% commission-free.
The platform also allows you to access other day trading markets such as cryptocurrencies, options, ETFs and ADRs (American Depositary Receipts). With Webull, you can also use fractional investing which allows you to buy in units less than one stock which is great for small account holders.
The broker is authorised and regulated by the Securities and Exchange Commission (SEC) and FINRA, providing a high level of safety and security. The Webull platform is feature-rich and simple to use and comes with some in-built research options.
However, Webull does not provide access to CFDs for day trading stocks. Instead, you have to buy real stocks and are limited to three day trading positions every 5 business days and will need to meet regulatory pattern day trader rules and have an account size of $25,000.
What we like:
- SEC and FINRA regulated
- 100% commission-free trading
- Trade stocks, options, cryptos, ETFs
- Feature-rich trading platform
Your capital is at risk.
Day Trading Explained
Day trading is the method of speculating on the price movement of an instrument within a single day. A day trader only holds trades during the day and will rarely hold trades overnight as they typically speculate on short term price movements in the market.
The frequency of trades taken during a day from a day trader is usually quite high. This is because they are looking for small gains through the day from prices moving higher or lower. Some of the best markets to perform day trading include stocks, currencies and cryptos.
How Does Day Trading Work?
There are a variety of methods when day trading the market. However, the most successful day traders will use a strict methodology to analyse potential turning points in the market for entry and exit points.
Day traders will often use technical analysis to identify potential trading opportunities throughout the day. Technical analysis is the use of chart patterns and technical indicators to identify turning points in the market where buyers and sellers could potentially turn up.
There are different products available to traders for day trading in the market. This includes purchasing real stocks or using leveraged products such as futures, options and CFDs. The simplest, easiest and most cost-effective way to trade the market is to use CFDs, or Contracts for Differences, provided by brokers such as eToro.
A typical day trader’s chart using technical analysis tools from eToro.
This is because CFDs are products which allow you to speculate on the price direction of a market. This means you could potentially profit from rising and falling markets – essential for a day trader looking to profit from short-term moves in the market. After all, markets will move up and down.
Furthermore, day trading the market using CFDs allows you to trade on margin. This means you could purchase a derivative of a stock without putting up the entire trade value. On some stocks on eToro, you only need 20% of the total trade value to take a trade. This means your capital can go much further which is necessary when day trading.
Day Trading vs Investing
There are a variety of differences between day trading and investing. The major difference is the holding time of a trade or investment.
- Day traders will hold positions for a day and be flat overnight.
- Investors will hold positions for many months or years.
Successful day traders can make a much higher rate of return than an investor. This is because day trading involves actively trading every day to capitalise on short term moves in the market. A day trader is effectively trying to time to the market.
Conversely, investors are not trying to time the market. Rather, they look for investments to be worth more in 1 – 3 years time. This means they will have to sit through the ups and downs of the market and see big price swings in profit and loss along the way.
Another major difference is the timeframe used to make trading and investing decisions. An investor is likely to analyse higher timeframes such as the monthly, weekly…
Read More: How to Day Trade Stocks in May 2022
