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Day Trading Guide

Day Trading Guide for Getting Started

Updated October 21, 2023 - Written by Ross Cameron

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Day trading is skyrocketing in popularity as more and more people are looking for financial freedom and the ability to live on their own terms. I'm writing this article as if you're a close friend who has asked me to give you a deep dive into day trading for beginners.

The first thing I'll tell you is that you have it so much easier than when I started day trading stocks. When I started day trading full-time following the Great Recession, high-speed internet was non-existent in the rural area of Vermont where I lived. The platforms, apps, and tools for trading were terrible.

Day trading for beginners is so much better today, but that doesn't mean becoming a profitable trader is easy. In this article, I'll draw from my own experiences making over $10,000,000 as a day trader. No, my results are not typical. But you probably wouldn't want to learn from just an average trader or from somebody who just gets paid to write articles but doesn't actually know how to trade themselves.

My goal is to help make your journey of learning how to day trade a little bit easier and to help you avoid all the rookie mistakes that I made in my own trading.

Let's dive in!

What is Day Trading?

Day trading is a short-term investment strategy that involves actively buying and selling securities on the same day in an attempt to profit from short-term fluctuations in price.

Popular markets to day trade include stocks, futures, forex, and cryptocurrencies. On lower volatility securities such as futures and forex, traders often use margin and leverage to increase their buying power. While using leverage offered by your broker has the potential to increase profits, it has also been the downfall of many traders. On higher volatility securities including penny stocks and stocks under $20, leverage can still be used but is not required.

Quick example: If you open a new position at 10AM and close it by 12PM on the same day, you have completed a day trade. If you were to close that same position the following morning, it would no longer be considered a day trade.

Day traders, or active traders, use technical analysis combined with one of the popular trading strategies such as momentum trading or contrarian trading.

A successful day trader doesn’t just pick any security and try to trade it. All of their decisions are dictated by their strategy. A good strategy will have a detailed set of rules that tell you the type of securities to trade, the time of day to trade, the chart patterns to use for entries and exits, and when to walk away each day.

How Does Day Trading Work?

Day trading is a strategy designed to capitalize on volatility in the markets on an intra-day basis. 

Day traders seek volatility in the market.  Without short-term price movement (volatility) there is no opportunity. Therefore, traders would have no interest in trading a stock like SirusXM. As shown in Figure 1 the $SIRI stock chart has no volatility. It typically trades sideways. The only way to make any money on this would be to use leverage to take a massive position and sell it for 2 cents a share. In short, the risk outweighs the return and no profitable trader would take interest in this type of stock.

Figure 1

As an example, Figure 2 is a screen capture from my Live Streaming Broadcast to Warrior Trading members. This shows the stock chart of a low-priced pharmaceutical company that moved up in price by over 500% on news of a positive outcome of a meeting with the FDA that allowed the company to enter Phase 3 studies of a drug they're developing. Although it's unrealistic for anyone to capture the entire 500% gain, it's much easier to make 10% of a 500% move than to try to make 10% on a stock going sideways like SirusXM. On this particular day, I finished up $22,654.98 in about 90 minutes of trading.

The best stocks for day trading are volatile Figure 2

How Much Money do Day Traders Make?

The national average income of a self-employed day trader is $94,266 per year according to ZipRecruiter, while a day trader working at investment firms makes an average of $133,818 according to Glass Door. Over at Zippia, they state that the average day trader's salary is $116,895 per year.

With approximately 250 trading days per year, a day trader who averages $400/day in profit will make $100,000 in profit per year before taxes. However, in order to make $400/day as a trader, there is certainly a minimum account size required. I would calculate at a bare minimum that your account should be 10 times the size of your daily goal. That would mean your daily goal is 10% account growth in 1 day. This is an ambitious goal. It's not one you'd likely realize every day, but I would say that is a minimum account size.

While the amount of money day traders can make is substantial, it's only the profitable traders who earn these gains. There is a bigger question we have to ask ourselves.

What is the Success Rate of Day Traders?

There have been several studies that have tried to answer the question of what is the success rate of day trading stocks. A research paper published in 2014 by professors from the University of California titled "Do Day Traders Rationally Learn About Their Ability?" studied over 3.7 billion trades and concluded that only 3% of day traders were profitable. However, a possible challenge with applying this to the US market today was that the study was conducted based on trades from the Taiwan Stock Exchange between 1992-2006.

A similar study analyzed traders on the Brazilian futures market between 2013-2015 and found that 97% lost money and only 1.1% earned more than the Brazilian minimum wage.

The only people who truly know the success rate of day traders are the brokers. However, in the absence of the brokers-dealers publishing the trading data of their customers, we are left to assume that most day traders will lose money. The commonly accepted statistic is that less than 10% of traders will be consistently profitable.

Later in this article, I will discuss the importance of practicing in a paper trading simulator before you ever put real money on the line. That step alone can save you a tremendous amount of unnecessary losses. Here's the reality, until you are able to prove you can make money in a simulator, you have no business putting real money in the market. Save your hard-earned money until you have a track record that supports investing real money in your strategy.

Advantages of Day Trading

  • For those who are profitable, it's hard to imagine making more doing almost anything else.
  • Great for nomadic lifestyles as you do it from anywhere you have internet.
  • Work for yourself. Enjoy independence.
  • Successful traders typically only work 2-3hrs/day.
  • No overnight exposure.
  • Mentally stimulating and engaging.
  • Very minimal overhead.
  • There is a much lower barrier to entry versus getting into real estate or starting a business.

Disadvantages of Day Trading

  • Requires start-up capital for a trading account.
  • The odds of success are very low.
  • There is a steep and long learning curve.
  • Requires risk-taker attitude.
  • Must be competitive and aggressive.
  • A high-stress job with ups and downs.

The Basics of Stock Charts for Beginners

Candlestick Charts

When momentum traders are looking for entries, we use candle stick charts. This is a style of stock charting that is very popular among day traders. The reason is that each candlestick communicates 4 important pieces of information. For the candlestick period, a candlestick tells us the high, the low, the open, and the closing price.

Candlestick stock charts for Day TradingFigure 3

Candlestick Chart Patterns

The shape of a candlestick communicates the sentiment in the market. A large green candlestick naturally is bullish, or strong, while a large red candlestick is bearish, or weak. However, a tiny red candle after 7 green candles in a row could communicate that the trend is weakening and perhaps about to reverse. The most basic form of technical analysis is understanding how to read candlestick patterns. Understanding the message communicated by individual candlestick shapes is essential for a beginner day trader. The next step is memorizing multi-candlestick formations and the meaning associated with them.

Popular Chart Patterns for Day TradingFigure 4

The Best Charting Time Frames for Day Trading

Most day traders, including myself, rely on 1-minute and 5-minute charts. Some traders holding positions for several hours may also use 15-minute or even hourly time frames. The way charts work is that when you select your time frame, each individual candlestick reflects that period of time. A 5-minute chart, for example, will only have 5-minute candles. For fast-paced markets, some traders will even utilize what are known as tick charts or 10-second charts. As you can see in Figure 5, when you open your stock chart, you will have the option to select the time frame for that chart. Many traders, including myself, will keep several time frames open for the same stock at the same time including a Daily Chart, a 1-minute chart, and a 5-minute chart.

Stock chart time frames for day trading Figure 5

Technical Indicators

In addition to using candlestick charts, day traders use technical indicators to help better understand the context of the current price and possible future direction. There are literally hundreds of different technical indicators you can choose from. So here's my 2 cents on this topic. Keep it simple. I do use technical indicators in my trading, but I don't switch them up.

I've noticed some traders are always looking for the next "holy grail" technical indicator that has 100% accuracy. The reality is, it's a myth. There is no indicator or strategy that has 100% success. Losses happen. Rather than focusing on loss avoidance, focus on keeping losses tight and searching for the next winning trade. Below are the most common technical indicators used by day traders.

The Best Stock Charts for Day TradingFigure 6

My preferred technical indicators

  1. Volume Bars: Volume bars communicate the number of shares traded during a period. If the chart is set to a 5-minute time frame, the bar is the number of shares traded in those 5 minutes.
  2. The 9-period Exponential Moving Average: Grey Line: a 9-period exponential moving average (EMA) is the first level of support for a stock when it pulls back. A stock well extended off the 9ema will be riskier to buy.
  3. The 20-period Exponential Moving Average: Blue Line:  a 20ema is the next level of support for longer-term pull-back patterns.
  4. The Volume Weighted Average Price (VWAP): Orange Line: VWAP is one of the most popular day trading indicators as it displaces the average price of a stock.
  5. The 200-period Exponential Moving Average: Purple Line: a 200ema is a long-term level of support and resistance
  6. Moving Average Convergence Divergence (MACD): This is an oscillating indicator that clearly shows trend changes.
  7. Relative Strength Index (RSI): Relative strength shows when a stock is extended and thus due for a pullback.

Popular Day Trading Strategies

Momentum Trading Strategies

My primary strategy is momentum trading. Momentum trading is a strategy that involves buying a security that is already trending up in price. Rather than trying to predict which security will be the next to make a big move, momentum traders use scanners to search the market for emerging volatility. Once a security has begun to move outside its standard range, a momentum trader will begin looking for entries. This is not a Warren Buffet value investment strategy. This is an aggressive "buy high, sell higher" day trading strategy.

However, it does have some clear advantages. Stock scanners make it easy to find securities making the biggest price gain each day. Active traders then research the stock to learn why the price is moving up. Typically it's because there has been some type of breaking news. This was the case in the example above in Figure 2. Once we establish the reason the stock is moving higher, we begin to use technical analysis to analyze the stock chart and look for a place to buy. The perfect entry offers a profit-to-loss ratio of 1:2. That means I'll risk $100 to make $200. As you can see in Figure 7, as long as I'm right 33% of the time, I'll be profitable with this ratio.

Figure 7

As a momentum trader, there are about a dozen different chart patterns I trade on a regular basis. These are patterns I've memorized and as I see them forming I immediately recognize the message they're sending about what the stock is likely to do next. In Figure 8 you'll see a standard bull flag pattern. This pattern occurs after a stock has made a big move up, and then begins to pull back slightly.

Momentum Chart Patterns

If we really analyze this pattern, what exactly is happening here? The stock surged up, likely due to breaking news. Then there is a period of profit taking. People who were in at the beginning of the move when the news was first released take some profit. Short sellers perhaps establish positions to profit from a decline. We see the stock pullback and I use my technical indicators to watch for levels of support. The stock should not retrace more than 50% of the initial move. Ideally, it will pull back to the support of the 9ema.

Where to Buy a Strong Stock

Figure 8

To briefly summarize how I trade this pattern, I'm buying the moment a green candle breaks over the high of a previous red candle. This is where the trend shifts from pulling back to moving back up. My max loss is the low of the previous red candle and my profit target is that the stock hits a new high of day. There are times when characteristics of this pattern do not offer a proper 2:1 profit-to-loss ratio. In those cases, I will not be able to take the trade.

Other considerations that will affect the outcome of the trade include the time of day, the price of the stock, the daily chart of the stock, the quality of the news, and whether or not this is the most obvious stock to trade.

Some momentum traders will adopt a scalp trading strategy. Scalp trading is when you execute many small trades while a stock is moving higher. Scalp traders need to have very high percentage of accuracy because if they experiencing a large loss it will wipe out several small base hit trades.

A few of the other momentum day trading chart patterns I trade

Contrarian Trading Strategies

A contrarian trading strategy is also called a reversal trading strategy. It can be traded both to the long side in the example of buying a stock that is very weak for a reversal back up, or it can be traded to the short side by selling a stock that is very strong and looking for a reversal back down. Earlier in my career I really liked reversals because I found it easier to visually understand my entry. I'd look for 8-10 red candles in a row then buy the first candle to go green. That makes sense right? Unfortunately, when stocks are declining strongly due to breaking news, reversal trading is a battle where you are fighting against the trend. You really need to have great timing in order to catch the reversal perfectly.

Contrarian Chart Patterns

Reversal trading is still popular today among many traders. In Figure 9 you can see two distinctive patterns. The first pattern is at the number 1. This is called a flat top breakout The entry would have been at approx $3.40 with a stop at the low of the previous red candle. The target on this trade is 10% with approximately a 5% max loss. This would have been a classic momentum trade.

Figure 9

Then we have the second pattern at number 2. This is a reversal. The first candle to close red is a short with the max loss at the high of day. This was a fairly dramatic pattern as the stock gave back the entire gains from the move up.

In my experience, reversal trading can be suitable for base hits. However, one large loss mistiming the change in trend can easily wipe out a number of base hits. This can leave traders with a negative profit-to-loss ratio. It can also be demoralizing to have 1 bad trade wipe out the progress of many small green trades.

The Most Popular Markets for Day Trading

  • Penny Stock Market OTC Markets: These are stocks priced as low as .0001 (yes, that's 1/100th of a penny) all the way up to $1.00. Pink sheet penny stocks present a unique risk due to the lack of required financial disclosures. I have personally avoided these entirely in my trading after once losing $15,000 on a terrible penny stock trade.
  • Nasdaq, NYSE Stock Market: This is the market where I'm trading. I focus primarily on small-cap stocks as they are more volatile than their large-cap counterparts such as Apple, Tesla, Meta, Netflix or Google.
  • Futures Trading: Futures trading is popular among many traders because it offers exceptionally high leverage. However, trading on 10x or 20x leverage presents the risk of losses that far exceed your account value. This can create a margin call, or a debt to your broker.
  • Forex Trading: Forex is similar to futures with the availability of leverage. In fact, leverage is required in order to profit from the relatively small moves in the currency pairs. I do not trade curriences of any kind.
  • Crypto Market: Crypto trading is as speculative in my opinion as pink sheet penny stocks. I don't think this is the right market to trade if you're looking to be a consistently profitable day trader.

Skills Required to be a Day Trader

Which skills do you already possess, which skills do you need to improve, and which skills do you need to learn? When I started trading I wasn't a master of all of these skills. I had to train myself to become more patient and disciplined in my trading. The fact is, trading does not come naturally to most people. You have to work on molding yourself to fit the profile of a profitable trader. The process of converting general knowledge to a skill is done through repetition. You must begin practicing in a day trading simulator and reflecting on your progress. This is the best way to learn.

Quick Learner

To be a great day trader (in less than 10 years), you need to be a pretty quick learner. It's essential to be a self-starter, to be self-motivated, and to be good at teaching yourself new skills. For most people, this is a trial-by-fire experience. It's a hands-on learning experience where you jump into a day trading simulator and press the keys. I think this also ties in with the skill of being a resourceful problem solver.

Independent Personality

Although you could apply to be a day trader at a trading firm where you'd go into an office daily, most of us are solo traders. That means you need to be an independent person who is comfortable doing things for yourself without a lot of help from others.

Critical Thinking

As a beginner stock trader, you need to be able to reflect critically on what is working for you and what is not. When you see other people who are profitable day traders, you have to ask yourself: "What are they doing that I'm not doing? If I were doing everything they were doing, I'd be profitable. How do I bridge the gap?".

Patience & Discipline

Two of the biggest skills I've had to learn are patience and discipline. I consider them very intertwined with each other. There are some days when there aren't a lot of great opportunities and the worst thing you can do is force it. That's when the big unnecessary losses come in. It requires both patience and discipline to restrain yourself in these moments.

Great Computer Skills

I'm fortunate that I grew up at a time when I learned to use the computer at a relatively young age. To be able to use the computer as an extension of your mind and body will allow you to interact in the market at the highest level. Being able to enter rapidly and exit positions requires excellent hand-eye coordination and a strong knowledge of how to use the computer.

Laser Focus & Quick Decision Maker

Great traders have an intense focus on the market when they're trading. We need to be focused on the chart patterns as they're forming, reading the flow of the market. Then, when the moment is right, we need to strike and send our order to the market. This requires laser focus, calm under pressure, and an ability to make a quick decision.

Be Comfortable Taking Risks

I honestly didn't think of myself as a risk-taker when I started trading. Now I can recognize that I do take risks when I'm trading, but I suppose because I've developed such a strong track record I don't think of it as much as a risk. I don't think of trading as gambling because I have a statistical edge based on a strategy and set of rules that I follow. But, trading is not without risk. So being comfortable with risk and learning to manage your risk is essential.

High degree of emotional awareness and emotional intelligence

Day trading stocks can be stressful and it can be emotional. We have big ups and we can have big downs. It's essential to know when you're becoming emotionally compromised. If I find myself getting emotionally activated I notice my heart rate increases and I start to get sweaty palms. At these moments, my decision-making process is hijacked by the emotions associated with loss, anger, frustration, and disappointment. This is my cue to walk away. It takes a high level of emotional awareness to recognize these triggers and walk away before you make a mistake.

Master of Technical Analysis and Order Entry Process

Lastly, you do need to master the actual skills of technical analysis and executing orders. However, you'll notice I placed them last on the list. If you are only good at this final skill but possess none of the others, it is very unlikely that you'll be profitable. For a person who possesses, or is willing to develop the other skills, the final task of learning technical analysis and the order entry process will feel simple.

How Much Money Do You Need for Day Trading?

In order to understand how much money you need you'll first need to understand some of the regulatory restrictions associated with different account types. You'll also want to understand what your personal trading goals are. Since this is one of the most common questions we get we made a video covering this topic in depth.

How much money do you NEED to Day Trade?!

As you may know, in January of 2017, I funded an account with $583.15 and began a Small Account Challenge. Within 45 days the account grew to over $100,000 which was an incredible return on investment. But it got better. By the end of 2017, my account balance was $335,000. In 2019, I crossed over $1 million dollars in day trading profits. By the end of 2022, following the bull market during the COVID pandemic, my account had crossed over $10 million dollars in profit.

For the skeptics out there, I understand! This guy turned $583 into $10 million? Is Warrior Trading Legitimate? How is that even possible? I had all my broker statements audited by an independent accountant consistent with the American Institute of Certified Public Accountant standards. And you can view my audited trading performance if you'd like. But that doesn't mean my results are typical. They are NOT typical.

So the answer is $500 bucks? Technically yes, but realistically no. I'd start with 10x whatever your daily goal is. Having more money in an account will only give you a bigger cushion. Just remember if you have an account with less than $1,000, expect slower growth.

Minimum Account Balances by Account Types

Cash Account: There is no minimum balance

The first account type is a cash account. A cash account gives you zero leverage. You can only trade with your cash balance and you have to wait for each trade to settle before you can trade again. When you sell a stock, the funds don't settle immediately. When I got started it took 3 days for a single trade to settle. It was called T3. Then it changed to T2, and now it's changing to T1.

T1 means if you take a trade today it will settle overnight and you can trade with those funds tomorrow. That means if you fund an account with $500 you could trade the whole $500 each day. Since I previously discussed setting my account size to at least 10x my daily goal, with a $500 account a daily goal would be $50. However, the account can still grow and as the balance increases, your daily goal can increase as well.

There are a few limitations to a cash account. The first limitation is that once you run out of cash you can't trade until trades settle. The second is that you cannot short stocks. The third is that there is no leverage.

Margin Accounts: There is a $25,000 minimum balance for U.S. residents

A margin account is an upgrade from a cash account. With a margin account, you can trade as much as you'd like, you can short stocks, and in the United States is a non-retirement margin account, you can have 4x leverage. That means with a $25,000 account you have $100,000 in buying power. However, U.S. residents are subject to limitations on margin accounts.

The Pattern Day Trader Rule

On February 27, 2001 the U.S. financial regulator FINRA adopted the Pattern Day Trader Rule. This rule only applies to margin accounts. The rule states that if you take more than 3 day trades in a 5-day period you are classified as a "pattern day trader" and you must maintain a minimum balance of $25,000 in your account. All U.S. brokers are required to enforce this rule. This means as a U.S. trader we have three choices.

  1. We can trade in a cash account and wait for trades to settle.
  2. We can fund a $25,000 margin account (IRA or regular taxable account)
  3. We can trade with an international broker

Margin Accounts with International Brokers: The minimum balance is $500

Many international brokers allow customers to trade in the U.S. Markets. Since the broker is located internationally, they do not enforce the Pattern Day Trader Rule. When I funded my small account with $583 dollars, I used an international broker.

For most traders, it makes a lot more sense to simply trade in a cash account with ThinkorSwim or Webull, even if it means the account grows a bit more slowly. The problem with the international brokers in my experience is that fees are higher and the taxes get complicated since these brokers won't issue a 1099 to a U.S. resident.

These brokers are not commission-free like U.S. broker-dealers. The payment for order flow practice that allows for commission-free trading in the United States is not allowed in other parts of the world. As a result, traders using these international brokers will face considerably higher trading costs than a U.S. trader.

A few international brokers for active traders:

  1. Interactive Brokers,
  2. Trade Zero
  3. CMEG

Trading with Leverage

It's worth mentioning that while trading with leverage is standard on lower volatility securities such as futures and forex, the use of leverage in small-cap stocks is not as important. When a stock goes up 50-100% in 1 day on breaking news, there is enough opportunity for even a cash account without leverage to capture a respectable profit. I'm currently trading in a retirement account. Since I have over $25k I can day trade as much as I'd like, but I'm not allowed to short stocks and I can't use leverage. These rules are specific to retirement accounts. However, nonetheless, I haven't found the lack of leverage to be a problem.

Leverage is a sword that cuts both ways. While you can use 4x leverage and turn a 10% winner into 40% account growth in 1 day, you can also do the opposite. Remember that if you lose 50% of your account, you have to double it to get back to whole. Until you have a well-proven track record of success, it's a great idea to leave leverage trading to the more experienced traders.

The Minimum Account Size Should be at Least 10x the Daily Goal

It's always going to be easier to trade in a margin account vs a cash account for the simple reason that you can trade more frequently. If there are 10 great opportunities in 1 day you can trade them all. In a cash account, you're restricted to just 1 trade a day.

While a cash account makes sense for a beginner trader, once you have a proven track record you'll probably do everything possible to get your account above $25,000.  Or you may seriously consider spending the extra money on fees and using an offshore broker for a few months to grow your account a bit faster.

Professional Trader at a Prop Firm

For traders with limited resources, trading at a prop firm can be appealing. Prop firms offer trading desks in most big cities around the world and will allow you to fund a small account that is given a lot of leverage so you are essentially trading with the firm's capital. This relationship skirts the Pattern Day Trader Rule but requires traders to get their Series 57 license and become employees of the prop firm. There is a profit split on all proceeds that you make trading.

Advantages of Prop Firms

  • You can get up to 100:1 leverage against your deposit.
  • You can trade alongside other traders and learn from them.

Disadvantages of Prop Firms

  • You have to pay to apply but that doesn't mean you'll get funded.
  • A profit split doesn't make sense once you are a proven profitable trader and can fund your own $25,000 trading account.
  • The trading fees will be higher than a commission-free broker.
  • You have to get your Series 57 license in order to trade the firm's capital.
  • Must trade strategies approved by the firm.
  • The firm can auto-close your positions and lock up your account at any time.
  • Requires you to be physically located near a prop firm.

Non-Professional Retail Trader

A non-professional solo retail trader has much more freedom than a prop firm trader. However, the freedom comes at the cost of being entirely self-funded. This is the path that I took when I was getting started. Living in Vermont, prop firms weren't even an option for me. So I became a solo trader by default. There are two reasons I think prop firms may not be around for much longer.

The first is because commission-free trading has changed the game. There is no longer a great reason to trade with an expensive prop firm.

The second is that I think prop firms only make sense for beginner traders. Once you've made your first $100k trading, why would you want to keep doing a profit split when you could easily fund your own account? Unless your strategy requires using excessive amounts of leverage only offered through a prop firm, I think being a solo trader is much more appealing long-term.

Day Trading Tools

There are a few different tools traders use. The first is the broker. This is the platform where we execute our trades. Whether the platform is provided by the prop firm or it's provided by the broker you open an account with, your platform is an important choice you'll need to make. Additionally, you'll need to decide which platforms you'll use for analyzing stock charts, stock scanning, and getting breaking news.

Brokers for Day Trading

Your broker is one of the bigger decisions you will make. After all, this is where your money will be and you will rely on them to provide fast executions at a reasonable price. There are several types of stock brokers out there, and most tend to serve a specific niche. In recent years, most retail traders have migrated to commission-free brokers since the cost of niche brokers has become more difficult to justify. Personally, I still use a broker that charges commissions in my trading, and as you'll see in the table below, the areas where they excel relate to more advanced trading concepts.

Direct Access versus Payment for Order Flow

Most free-commission brokers act as a middleman between the market and your order. In the payment for order flow arrangement, the brokers sell your order flow to a wholesaler. These wholesalers often execute your orders without ever sending your order to the Nasdaq or NYSE exchanges. In this relationship, the wholesaler guarantees they'll get you a slightly better price than if your order went to the open market. You're happy since you get "price improvement" over the national best bid and offer. This business model works because the exchanges quote stocks above $1.00 a share with a minimum spread of 1 penny. However, the wholesalers can split pennies.

What this means in practice is that when a wholesaler executes an order, they can split a penny 4 ways. You get 1/4 of a penny in price improvement, the person selling you shares gets 1/4 in price improvement, the wholesaler keeps 1/4 of a penny in profit, and the broker-dealer gets paid 1/4 for the order flow. At the scale of millions of shares a day, wholesalers and broker-dealers are making billions of dollars a year on this arrangement.

SharesProfit at ¼ of a Penny10,000$25100,000$2501,000,000$2,50010,000,000$25,000100,000,000$250,0001,000,000,000$2,500,000

This is an order routing practice that prioritizes profit over execution speed. I use a broker that offers direct access to the market. I pay a fee directly to the exchanges for these orders, but in exchange, my orders are executed faster. In the fast-paced world of day trading, and at the scale that I trade at, I think the cost of direct routing is worth it. However, for a beginner trader, I think commission-free trading is really appealing.

Broker Comparison

Charles Schwab
Commissions for Stock
$2.95 Per Trade
Commissions for Options
.65 cents
.65 cents
.20 cents
Direct Access Routing
No by default but can be enabled
Routing Fees
.003 per share ($3 per 1k shares)
Price Improvement
$1.28 for every 100 shares
Only 67 cents per 100 shares
$1.15 for every 100 shares
$6.05 average for orders up to 9,999 shares
Execution Speed
Not published
.02 second
.02 second
.10 second
Up to 1,500 orders in 1 second with high-frequency trading API
PDT Rule
Paper Trading Simulator
Min Account Size
Accept International Accounts
Market Data Costs
$5/mo for Gold
Free with $1,000 min balance
Extended Hours
4am to 8pm
7am - 8pm
7am - 8pm
Retirement Accts
Stock Scanners
Sort of
Sort of
Yes but not good
Sort of, but not good
OTC Stocks
Desktop Experience
(Desktop Application)
Level 2
Yes - Only with Gold $5 per month
1.99 per month
Requires Min $1,000 Account
Hot Keys on Desktop
Sell Pos %
Less than a dozen technical indicators available
Acceptable for Beginners, better than Robinhood, not as good as TOS - 52 indicators
More technical indicators than you could dream of
Charting is basic
Not very good charting
15 Second Charts
Mobile Experience
Super Simple, limited features
Super simple, more features than Robinhood, less than Think or Swim, more intuitive…
Robust features, very sophisticated
Solid mobile experience but not as good as ThinkorSwim

Stock Charts for Day Trading

All the brokers listed above offer at least basic charts on their platforms. Webull is currently the only broker that offers 10-second time frames. I like using a 10-second time frame, which is why for the longest time I used eSignal for my charts. However, eSignal costs nearly $200/mo it was only for charting. In 2017 we began a development project at Warrior Trading to build the ultimate platform for active day traders like me. It's called Day Trade Dash, and it features stock charts, scanners, breaking news, and chat rooms. It's a complete Day Trade Dash(board). Whether you use our charts or you use the charts provided by your broker, there are a few "must-have" features for active trading.

Charting Essentials

  1. Sub 1-min charts including 10-second or 15-second charts
  2. Market Data that is scrubbed to remove erroneous quotes since they skew the candlestick charts
  3. Accurate charts for Reverse Splits.
  4. Charts for Initial Public Offerings (IPO's), Other-the-Counter (OTC) Uplist to Nasdaq/NYSE, and Special Purpose Acquisition Companies (SPAC's).
  5. The indicators you need for your strategy.

If you don't have accurate charts it will be nearly impossible to make good decisions on your trades. On September 14, 2014, when Alibaba IPO'ed I wanted to trade it, and at the time I was using TC2000 charting software. Unfortunately, the charts didn't load and when the stock began trading I was blind. I couldn't trade it and I missed an opportunity. That was when I switched to eSignal. Personally, I loved eSignal, but as part of our development work, I wanted to create a platform that included charts and was much more cost-effective. Now I exclusively use Day Trade Dash in my trading.

Stock Charts with Day Trade DashFigure 10

Scanners for Day Trading

When it comes to active trading, stock scanners are the most valuable tool. This is my radar that helps me find momentum and volatility in the market in real time. But because it consumes real-time data scanners do not come cheap. There are delayed data scanners such as Finviz that can be used for long-term investing or swing trading. However, for intraday trading when minutes count, a 15-minute delay is useless.

As part of our development work on Day Trade Dash, when we subscribe to market data quotes from the exchanges we can use them for charting and stock scanning. By combining these tools together, our members save money by not having to double pay on exchange fees. When traders use tools from a variety of service providers they end up double or even triple paying on the market data fees. One of the biggest costs of running these scanners is paying the exchanges for the real-time market data each month.

It's worth noting that there’s a distinct difference between a stock scanner and a stock screener:

  • Stock scanners are constantly scanning the market and streaming real-time results (this is what I use)
  • Stock screeners simply search the market for criteria that provide you with a static list of stocks, usually with data from the previous day (this is what you can get for free)

A good stock scanner is a "must have" tool for most day traders, especially those who trade on very short time-frames.

Why do you need a stock scanner?

The reason scanners are so important is that they are the tools that help you find the right stocks to trade. As part of your trading strategy, you'll have a set of rules that dictate the right type of stocks to trade. In Figure 11 you'll see my 5-point criteria that a stock should meet in order for me to consider trading it.

On my Watch List page of the Best Stocks to Day Trade, I outline in detail exactly the type of stocks I'm looking for on any given day. That page is worth taking a peak at if you haven't already seen it.

Criteria of the Best Stocks to Day Trade

Figure 11

Using a Stock Scanner

Out of thousands of stocks in the market, the only way to find the small handful of stocks that meet my criteria in real time is by using a stock scanner. In Figure 11 you'll see my Top Gapper scanner. This is a scan that is searching simply for stocks moving higher. I sort this scanner based on the percentage of the gap. A gap is when a stock is opening higher than it closed the previous day. Gaps occur when stocks come out with breaking news overnight.

Additional columns on this scanner allow me to quickly check the Float, the Relative Volume, and the Price. Once a stock hits the scanner, I review each of the data points in these columns to see how closely a stock meets my criteria outlined in Figure 11.

Figure 12

In Figure 13 we can see a High of Day Momentum Scanner. This is a scanner that produces an alert (including an audio notification) that a stock has made a new high of day. However, this scanner doesn't just alert anytime any old stock hits new highs. This scanner is specifically tuned to only alert for stocks that already meet my criteria for momentum trading. Each time the stock hits a new high, it will appear on the scanner again. When I hear repeated audio notifications, I know a stock is moving very quickly.

Figure 13

How to Find Breaking News

Once I see a stock on my scanner, the next step is to check to see what the breaking news is. Before I started using the built-in news window in the Day Trade Dash (See Figure 14) platform I would visit the stock quotes page on Warrior Trading and type in any stock symbol to check the news. You're welcome to use the stock quotes window for free as your source of breaking news. As an active trader, I don't spend a lot of time doing fundamental analysis. If I see a stock that has a news headline and the price is going up, I'm happy to trade it. If I were a long-term investor I would need to do more research on the substance of the news but as a day trader, it's not as important.

Figure 14

How to Start Day Trading

1. Learn the terminology, some basic technical analysis, and how to use a trading platform

In short, your journey of learning how to day trade begins with getting familiar with the trading terminology. You'll most likely start recognizing these terms and phrases as you read books about day trading or watch video lessons. The next step is getting comfortable with the concepts of technical analysis. As I mentioned earlier in the article, learning to trade is very much a trial-by-fire experience. The best way to develop this skill is by applying the things you're learning by trading in a simulator.

2. Adopt a Strategy

You'll need to choose a strategy. On the one hand you could try to develop your own strategy, but on the other hand, there are many traders out there who have already done the heavy lifting. Finding a trader who has a strategy that interests you is a great starting point. I'm just one trader, but there are many out there. The most important thing is that you confirm the person you're learning from is actually a profitable trader. There are people out there who are teachers, but they don't actually prove the strategies they teach work with their own money. This personally makes me pretty skeptical, but you should do what feels right for you.

3. Choose Your Tools

The strategy you choose will dictate the specific tools needed. But in general, you'll need to choose a broker, you'll need charts, and stock scanners, and you'll need a place to find breaking news. It's also not a bad idea if you can immerse yourself in a trading community. After all, they say we become the people surround ourselves with. Might as well surround yourself with profitable traders as you're learning this new skill!

4. Practice in a Simulator

I can't emphasize this enough. Do not put real money into the market until you've proven profitability in a paper trading simulator! There is not a chance you'll be consistently profitable without first getting a lot of experience trading. A lot of beginner traders practice with real money and unfortunately, they suffer unnecessary losses. You can gain experience while minimizing losses by doing it in a simulator.

5. Assess Strengths and Weaknesses

We know there is a set of skills that support success as a trader. You need to do an honest assessment of what skills you currently possess, which ones you need to improve, and which ones you need to learn.

6. Monitor Your Metrics

I'm a big advocate of tracking your metrics. After all, my metrics are what tell me all the details of what is working in my strategy. Metrics will tell you your percentage of success, your profit-to-loss ratio, the time of day you make the most, the day of the week when you trade the best, and much more. When I was getting started I simply tracked my metrics manually in an Excel doc. You can do that for free. If you want to spend some money, you could consider something like TraderVue. That's what I use. It's about $47/mo but it's money well spent.

7. Transition to Real Money

Once you've proven profitability, then it's time to switch to trading and start trading with real money. But just because you've practiced in the kiddy pool of the simulator doesn't mean you should jump out in the open ocean. Go slow! I think the best way to transition is to start trading with real money and just use 10 shares for the first day. Work out the kinks. Make sure you know what you're doing. There is always a little adjustment period as you transition from paper trading to real money. And don't forget, this is when the real training begins when it comes to emotional conditioning! So scale up that share size slowly and make sure you don't get in over your head.

Your Next Big Milestone is Day 1 Sim

Your next big milestone is Day 1 Sim. I'd like to help you get there. I'm going to propose two possible paths that you can follow. Either one is fine to take, it just depends on what is a better fit for you.

The Slow Lane

Grab a copy of my book titled "How to Day Trade", subscribe to my YouTube Channel, and watch as much of my free content as you can.

The Fast Lane

Give our platform a try with a 14-day trial. During the trial, you will get access to the following:

  1. The Day Trade Dash Platform with Stock Scanners, Stock Charts, Breaking News
  2. Access to a sneak preview of the Warrior Pro experience with my Live Audio/Video Broadcast, Warrior Pro Mentor Sessions, and our members-only chat room community.

Frequently asked questions

In order to start day trading stocks you need a broker that can provide quick executions, have reasonable fees and commissions as well as a strong charting platform. With these requirements in mind, we highly recommend LightSpeed, ThinkorSwim, and Interactive Brokers.

Yes, there are apps that you can day trade on. However, we don’t recommend it. They are typically slower to navigate and can be hard to trade fast-moving stocks on. Some popular trading apps include Robinhood and WeBull.

This all depends on you and your goals. You can start by asking yourself how much discretionary money you have to trade with. What are your trading income goals? From there you can use percentages of your account balance to make profit goals and risk parameters for your trading.

For a detailed discussion on this topic check out How Much Money You Need to Day Trade.

Day trading is neither illegal nor unethical. Day trading has existed since the formation of the first securities exchanges centuries ago. There are agencies that regulate the financial markets, including FINRA. There are regulations that require margin accounts specifically to have a minimum balance of $25,000 if it is to be used for day trading. Aside from these regulations, there are no laws prohibiting day trading.

There have been some political movements that have tried to reign in Wall Street and reduce the profit that comes from active trading by implementing a transaction tax. These have not received any widespread support and as a result, nothing has been or is likely to be approved.

On February 27, 2001, FINRA enacted the Pattern Day Trader Rule to prevent novice traders from day trading on margin and with leverage. The rule states that if you trade more than 3 times in a 5-day period you must maintain a minimum account balance (including the value of any positions held) of at least $25,000. This is sometimes called the $25k Day Trading Rule.

Regulators define a pattern day trader as an individual who executes more than 3 trades in a 5-day period. Pattern Day Traders are required to maintain a $25,000 if they are trading in a margin account. However, regulators do not enforce this rule on cash accounts. A trader with a cash account could trade as many times as they'd like until they run out of cash and have to wait for the trades to settle.

The average day trading salary for an employed trader is between 160K - $291K according to the Glass Door. The average income for a self-employed retail trader is between $96k-116k  ZipRecruiter,  and Zippia. Despite the high salary, the odds of success in trading are believed to be less than 10%.

While anyone can open an account with a commission-free broker and start trading with $100, the growth would be slow at the beginning. A great day trader will aim to grow their account by 10% in 1 day. That means the best trader would only make $10 on a good day with a $100 account. Of course, just 10 good days like this and the account will double.

A trader with a $100 account who has true skill could see compounding growth, but for most people, a $100 account will not produce a good return on investment. Rather, it should be considered a proof of concept. If you can grow a $100 account to $300. Maybe it's worth funding a $1,000 account and seeing if you can maintain your performance.

Yes, it's possible to make money day trading. and there are people who make a lot of money actively trading the markets. However, all available studies indicate the success rate of day traders is less than 10%. For that reason, we caution that trading is risky and there are no guarantees for success.

After analyzing over 24,268 individual trades, the best days of the week to trade are Wednesday and Thursday for my day trading strategy.

Best Day of the Week to Day Trade

After analyzing over 24,268 trades, the best time of the day to trade is between 8am-11am for my day trading strategy.

Best Time of Day To Day Trade

The Best Stocks for Day Trading, in my experience and based on my personal strategy, are stocks with great liquidity, volatility, and typically some type of breaking news. I run a scanner that produces a watchlist of the best stocks to trade that is available for free and updates during market hours.

Even for the best traders, the learning curve from zero to making $1000 per day will be several months long. In order to consistently make $1000 per day as a day trader you will need a proven strategy and a set of rules that you follow every day. While it's possible to make $1000 per day trading, this would be setting the bar very high for a beginner trader.

A rookie trader should first practice in a day trading simulator and prove they can consistently make even just $100 per day. After a period of consistency in a simulator, transitioning to real money is a logical choice.

Day trading profits are considered short-term capital gains. Short-term capital gains are taxed at the same rate as regular income. The tax rate will vary depending on your income bracket. Traders in high-income brackets (like myself), tend to trade in Retirement Accounts which can be tax-free.

The answer is yes, most brokers support day trading in a retirement account including Traditional IRAs and Roth IRAs. I have personally traded in an IRA with Lightspeed, Interactive Brokers, and ThinkorSwim.

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Warrior Trading may publish testimonials or descriptions of past performance but these results are NOT typical, are not indicative of future results or performance, and are not intended to be a representation, warranty or guarantee that similar results will be obtained by you.

Ross Cameron’s experience with trading is not typical, nor is the experience of traders featured in testimonials. They are experienced traders. Becoming an experienced trader takes hard work, dedication and a significant amount of time.

Your results may differ materially from those expressed or utilized by Warrior Trading due to a number of factors. We do not track the typical results of our past or current customers. As a provider of educational courses, we do not have access to the personal trading accounts or brokerage statements of our customers. As a result, we have no reason to believe our customers perform better or worse than traders as a whole.

Available research data suggests that most day traders are NOT profitable.

In a research paper published in 2014 titled “Do Day Traders Rationally Learn About Their Ability?”, professors from the University of California studied 3.7 billion trades from the Taiwan Stock Exchange between 1992-2006 and found that only 9.81% of day trading volume was generated by predictably profitable traders and that these predictably profitable traders constitute less than 3% of all day traders on an average day.

In a 2005 article published in the Journal of Applied Finance titled “The Profitability of Active Stock Traders” professors at the University of Oxford and the University College Dublin found that out of 1,146 brokerage accounts day trading the U.S. markets between March 8, 2000 and June 13, 2000, only 50% were profitable with an average net profit of $16,619.

In a 2003 article published in the Financial Analysts Journal titled “The Profitability of Day Traders”, professors at the University of Texas found that out of 334 brokerage accounts day trading the U.S. markets between February 1998 and October 1999, only 35% were profitable and only 14% generated profits in excess of $10,000.

The range of results in these three studies exemplify the challenge of determining a definitive success rate for day traders. At a minimum, these studies indicate at least 50% of aspiring day traders will not be profitable. This reiterates that consistently making money trading stocks is not easy. Day Trading is a high risk activity and can result in the loss of your entire investment. Any trade or investment is at your own risk.

Any and all information discussed is for educational and informational purposes only and should not be considered tax, legal or investment advice. A referral to a stock or commodity is not an indication to buy or sell that stock or commodity.

This does not represent our full Disclaimer. Please read our complete disclaimer.

Citations for Disclaimer

Barber, Brad & Lee, Yong-Ill & Liu, Yu-Jane & Odean, Terrance. (2014). Do Day Traders Rationally Learn About Their Ability?. SSRN Electronic Journal.

Garvey, Ryan and Murphy, Anthony, The Profitability of Active Stock Traders. Journal of Applied Finance , Vol. 15, No. 2, Fall/Winter 2005. Available at SSRN:

Douglas J. Jordan & J. David Diltz (2003) The Profitability of Day Traders, Financial Analysts Journal, 59:6, 85-94, DOI:


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