So, you want to day trade, huh? You think you have what it takes to run with the wolves and use strategies our admins years to master. Good. We welcome you.
Before you get started, you’ll need this guide on day trading. It’s a fast-paced but rewarding way to grow your options account, so we want you to be prepared.
So, what is day trading?
In our common trading terms list, we define day trading as when an options trader buys an options contract with the plan to sell it on the same day.
It sounds simple enough, so let’s talk about what you need to get started and some strategies we recommend to day trade successfully.
If you’re new to day trading, start here.
We recommend starting with a paper trading account as you learn how to day trade. Why? Because you need a good understanding of charting, stop losses, stop orders, and when to take profit to day trade profitably.
Once you start using real money to day trade, you’ll need to trade using a cash account or have an account larger than $25,000 to avoid the PDT rule. You can learn how to day trade with less than $25,000 here.
If you think you’re ready for day trading, buckle up. To day trade profitably, you need to have great discipline. Make a plan and stick to it. Max recommends setting a 1% to 2% trailing stop loss on most day trades. A small stop loss allows you to cut losers quickly and secure profits rapidly. If your trade quickly goes up 10% and then drops a bit, you automatically take an 8-9% profit. When you think about it, the average stock portfolio goes up 5-15% per year, so taking 8-9% on every trade is an excellent way to grow your portfolio.
Max often takes profit automatically at 10-15% by selling half of his positions. Then he lets the rest of his positions ride to 20-30% gains with a tight stop loss. Since he’s day trading, he’s looking for the next entry and doesn’t want to spend too much time watching his trade when it’s already profitable. A few 10-30% gains in a day lead to a nice day of profits.
Our best advice is to make a plan and stick to it. If you plan to take profit at 15% no matter what, do it. You will never regret taking profit.
Day Trading Tips For Success & Profit
You have a plan; now, let’s talk about how to execute it.
One strategy for identifying a good stock to day trade is to look at volume. Any stock with unusual volume is a good option for day trading. Max typically looks for any stock with at least two times its average volume.
You also want to find highly volatile stocks to day trade. High volatility means the stocks price changes often, which is crucial for day trading since, as a day trader, you’re looking for rapid stock movements that you can profit off of quickly before moving to the next trade.
Knowing a stock well helps when day trading. When you know a stock well, you’ll have it charted out, so you know where the support and resistance lines are. As the stock creeps down to a support line, you may want to scalp some calls for when it bounces back up.
Knowing a stock well also means you’ll know how it typically reacts when earnings reports come out or if any important news has come out recently that may increase the volatility of the stock.
What Does A Day Trader Typically Make?
Max often says, “$200 per day keeps the day jobs away,” and it’s reasonable for a good day trader to make $200 per day with smart trades based on the factors we talked about in the last section.
Entering a highly volatile stock like TSLA on a day when important news comes out or Elon tweets something cryptic can lead to massive gains in seconds. It’s possible to make hundreds on a trade like that and be done trading for the day in just one good trade.
What Happens Next?
After reading this, I hope you feel more confident about day trading. I highly recommend taking a few additional steps before day trading for yourself. Take Max’s free course on day trading, take a coaching session to sure up your knowledge and strategies, and join our Discord so that you can access our knowledge and trading support 24/7.