You can make money from day trading. If you are here, you likely never heard of forex, candlestick patterns, or stop-loss orders before. The term day trading could have come up from a conversation with your co-workers or from a video of an influencer talking about index strategies.

If the term seems unclear, our article on day trading for beginners is for you. We cover the basics when it comes to trading, including the assets you trade.

Disclaimer: This is for education only, not financial advice. Trading involves risks where you can lose money!

Key Takeaways

• Day trading focuses on buying and selling liquid assets within the same day. Volatility creates chances to profit, but it also increases risk.
• Profits and losses come from price changes. You can make money on rises and falls, including short positions when you borrow shares and try to repurchase them at a lower price.
• Market hours shape your approach. Many traders act near the open, while pre-market and after-hours often have less liquidity and wider spreads.
• Start with foundations before real money. Open a brokerage account to learn the platform, use a demo to practice, and keep a trade journal to track every lesson.

Understanding Day Trading for Beginners

Trading is essentially the buying and selling of liquid assets or ones that can easily be turned into cash. These assets involve stocks, options, futures, and currencies. The goal here is to profit from the price movement of these assets.

“Day” trading means buying and selling these assets within the same day. Active traders take advantage of the short-term price movement during trading hours. Volatility, or the rapid movement of the market, allows for massive money-making opportunities.

How Profits And Losses Actually Happen

One essential lesson to learn in our guide on day trading for Beginners: Profits are made by exploiting price changes. Day traders make smart predictions about market movements through careful analysis and in-depth knowledge.

If a company is about to announce its latest phone on Monday, day traders are buying that company’s stock when the market opens. Historically, renowned brands like Apple see their stocks rise drastically in value when they announce a new iPhone. If a popular company similar to Apple does the same, there is a chance that its stock prices will follow suit.

Keep in mind that stocks do not need to increase their value for day traders to profit. You can still make money even if an asset’s value plummets. This practice is done through short positions, where you borrow shares and sell them at a lower price. A good example of shorting can be seen in the movie The Big Short, which showed how Michael Burry and other investors made money from the crashing housing market.

Price movements are also the reason why day traders lose money. Should Apple stocks drop due to a controversy with their new device, or if the housing market does not collapse, day traders are likely to experience losses.

Day trading involves taking advantage of the rapid price movement.

How Day Trading Differs From Investing