What is Day Trading?

In This Lesson

Introduction to day trading concepts and requirements.

Duration: 20 min

Overview

Introduction to day trading concepts and requirements. This lesson will provide you with practical knowledge and actionable insights you can apply to your trading immediately.

By the end of this lesson, you'll have a clear understanding of the concepts and be able to apply them in real trading scenarios. Let's dive into the details.

Key Concepts

Day Trading Definition

Buying and selling securities within the same trading day, holding no positions overnight.

Pattern Day Trader (PDT) Rule

SEC rule requiring $25,000 minimum account balance for accounts making 4+ day trades in 5 business days.

Buying Power and Leverage

Day traders get 4:1 intraday buying power, allowing larger positions than account value.

Market Hours and Sessions

Regular trading hours (9:30 AM - 4:00 PM EST) plus pre-market (4:00 AM - 9:30 AM) and after-hours (4:00 PM - 8:00 PM).

Commission and Fee Structure

Day trading involves frequent transactions, making commission costs a significant factor in profitability.

Practical Application

Now let's put this knowledge into practice. Follow these steps to apply what you've learned:

1. Ensure you meet PDT rule requirements with $25,000+ account balance
2. Choose broker with low commissions, fast execution, and professional tools
3. Set up dedicated trading workspace with reliable internet and backup power
4. Practice with paper trading for at least 3 months before using real money
5. Develop realistic profit expectations: 10-20% annual returns are excellent for day traders
6. Create daily routine including pre-market preparation and post-market analysis

Common Mistakes to Avoid

Thinking Day Trading is Easy Money

Believing day trading is a quick way to get rich with minimal effort or education.

Starting with Insufficient Capital

Attempting to day trade with less than $25,000, limiting opportunities and increasing pressure.

Underestimating Time Commitment

Thinking day trading can be done part-time or casually while maintaining other responsibilities.

Key Takeaways

Day trading is a full-time profession requiring significant capital and dedication
PDT rule compliance is essential - build adequate capital before starting
Transaction costs can eliminate profits if not carefully managed
Success requires treating day trading as a business, not gambling
Most profitable day traders focus on consistency over home runs

Your Next Steps

Ready to continue your learning journey? Here's what to do next:

• Review this lesson's key concepts
• Complete the practical exercises
• Take notes on what you've learned
• Practice with a demo account
• Move on to the next lesson when ready