How to Day Trade Stocks in 2022 – A Beginner’s Guide

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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 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 most popular trading tools and fees. 

How to Day Trade Stocks  – 5 Steps

If you’re eager to start day trading stocks today, then follow this five-step guide to do so. 

  • Step 1. Choose a stock trading platform – To start day trading stocks you need a trading platform. It doesn’t get any better than an FCA-regulated stockbroker.
  • Step 2. Deposit – To speculate on the price direction of stocks you need capital to do so.
  • Step 3. Research the market – When trying to find the most popular 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 most popular stock – we’ll show you how to do it below.
  • Step 4. Choose which stocks to trade  – 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.

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 most popular 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 most popular day trading stockbroker as we’ve done the work for you and explain our findings below. 

1. eToro – Overall Most Popular Day Trading Stockbroker

eToro is by far one of the most popular 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. For those looking to day trade stocks a trading platform with tight spreads and fast execution times is vital. As such eToro has been dubbed one of the most popular scalping brokers of 2022. Follow the link and read more about scalping as a trading strategy.

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 most popular 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 most popular 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 – one 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 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 range of educational materials through its trading academy. This includes articles, webinars and courses. Furthermore, you can access expert analyst research from investment banks through the research section which can help you find 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. 

Your capital is at risk. 68% of retail investor accounts lose money when trading CFDs with this provider.

2. Webull – Day Trading Stockbroker

Webull is another 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 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. 

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 most popular 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 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 and daily charts. A day trader is more likely to use lower timeframes such as the 15, 30 or 60 minutes charts. 

Why Day Trade Stocks?

The global stock market is currently worth around $117 trillion. More than $49 trillion comes from US stock markets which represent the largest amount of day traders in the world. Individuals from all walks of life enter the stock market full-time to capitalise on the daily price swings in stock prices. 

With the advent of technology and more competition between brokers and trading platforms, everyday people can now day trade the stock market. It’s never been simpler to open a trading account and start speculating on the price action of stocks such as Apple and Tesla. 

Of course, while it is simpler than ever to get started day trading stocks – as a disclaimer – it does not mean to say you will find instant success. To be able to build a consistent revenue stream and futures results you need to follow a proper plan to make money from day trading. 

How to Make Money from Day Trading

To make money from day trading the market having a plan is essential. Here is a guide on what you need to day trade successfully before we look at some of the most popular day trade stocks.  

1. Use a commission-free stock broker

The key to day trading is to be able to make regular profits from short term price movements within a single trading day. The last thing you want is those profits being taken away through trading commissions.  

2. Focus on a core selection of stocks

Every stock has a certain character and moves a certain way. The most popular stock to day trade is what you are most familiar with. When you first start day trading, stick to a few stocks and trade them every day. This way, you will get a feel for how that stock moves and are more likely to see patterns develop that you can trade on. 

3. Learn about technical analysis

When trying to identify how to find day trade stocks, most day traders will use a lot of technical analysis to make their trading decisions. This is the art form of studying price and chart patterns. There is a wealth of information online regarding technical analysis. 

4. Trade a strategy and focus on risk management

Having a day trading strategy is essential. After all, trading short term price movements means you need to analyse all the information available to you and make a decision on where you think the market may move next. 

Your ability to process this information is important to get in at an ideal price. Having a strategy serves as a checklist that can help you analyse what you need to in a short period of time while remaining objective. 

Be sure to exercise risk management as well. Keep your trading size small, so if a few trades go against you it doesn’t wipe out your account. 

Your capital is at risk. 68% of retail investor accounts lose money when trading CFDs with this provider.

Day Trading Hours

When considering how to find stocks to day trade today it’s important to know the most popular trading hours to focus on. Most people day trading the stock market will focus on the US stock market as it is the largest in the world. 

The stocks that trade on the New York Stock Exchange and the NASDAQ Exchange open at 9.30 am and close at 4.00 pm Eastern time (ET). You could also day trade UK and European stock markets but the biggest price moves will be on the US stock market and that is essential for a day trader. 

Some day traders may also choose to focus on the world’s largest market which is the currency market. This is open 24 hours a day, providing even more opportunities for day traders. 

Stock Price Movements

For day trading, price movement is essential. After all, you can only make a profit if the price of the security has moved from one price level to another. Therefore, it might be ideal to try and stick to the times of day where there is the most price movement. 

The chart below shows the price activity from a 15 minute chart on Apple’s share price. The indicator beneath is the Average True Range (ATR). This tells us what the average range of the price bars has been for each 15 minute bar. 

What you will notice is that there tends to be a spike in the ATR reading around the same time each day (a new day starts at each vertical line on the chart). The spikes tend to occur at the end and beginning of the trading day with lower readings throughout the day. 

This means there is more price stock price movement during the last 30 minutes and the first 30 minutes of the day. This is why most day traders tend to focus on these times to try and capitalise on these bigger price swings. 

What are the Most Popular Stocks to Day Trade?

If you want to learn more about the most popular stocks for day trading then look no further. Below is a list of the five popular day trading stocks to focus on right now.

We’ve focused on blue-chip stocks for the list. While it may sound enticing to try and find the most popular penny stocks to day trade this is very risky and not suited for beginners. 

1. Apple (AAPL) – Popular Day Trading Stock Due to Recent Stock Split

Apple is one of the largest and most recognised companies in the world. It is one of the most popular day trading stocks available because of this and the fact it has gone through five stock splits. 

A stock split is where a company issues more stock to bring the overall price of one share lower while retaining the same overall market value. This means you can trade on a trillion-dollar company at a much lower price which makes it easy to purchase regular stock through the day when day trading.

Most people are familiar with Apple and will have an understanding of when there are new product launches. This knowledge will prove to be useful when trading as Apple’s stock price can rise before a new product launch as investors anticipate the hype it can bring. 

2. Tesla (TSLA) – A Firm Favourite Among the Day Trading Cult

Day traders are known as a cult group. After all, day trading is a specialised skill set which requires some commitment and passion in what you are doing. A firm favourite among this group is Elon Musk’s company, Tesla. 

Many day traders simply like to trade Tesla stock because they like Elon Musk. But the most important reason is because of the rise in demand for electric vehicles. It’s a hot, new sector with exponential growth which leads to big moves in Tesla’s share price making it an ideal addition for day trade stocks to watch.

3. Amazon (AMZN) – Popular for Day Trading Volatile Stocks

If you’re interested in day trading volatile stocks then Amazon could be for you. Not only is it one of the largest companies in the world, but more than 7 million shares also change hands every single day. 

Amazon stock is considered to be volatile and will often move big figures on a trading day. In fact, the stock can move between $50 and $100 a day making it an option for day trading. 

The world’s biggest online retailer has also announced plans for a stock split which will make its share price even cheaper, attracting more day traders and increasing the intraday volatility of its share price. 

4. NVIDIA (NVDA) – A Day Trading Stock with High Volume

NVIDIA is a well-known company whose chips and graphics processing units are used extensively in electric vehicles, crypto mining rigs, gaming consoles and most electronic items. 

It is one of the most popular stocks to day trade due to its high trading volume. More than 62 million shares are traded every single day – almost ten times higher than Amazon’s shares. This turnover creates some moves on an intraday basis that day traders can capitalise on.

The stock is also relatively cheap compared to other tech companies at the same level. So, if you have a small day trading account then day trading NVIDIA stock could be for you. 

5. Microsoft – A Firm Favourite Among Institutions

Microsoft is another well-known company. While the stock price moves much less on an intraday basis than some of the other stocks listed above, it is stable. This can be useful when using swing day trading strategies which involves trying to trade one move within a single trading day. 

There is a tendency for most of Microsoft’s daily moves to be done within the first hour of the trading session so it should be in the to watch list. Having the right platform and trading with a commission-free broker like eToro will be important when considering how to pick stocks for day trading.

Your capital is at risk. 68% of retail investor accounts lose money when trading CFDs with this provider.

Day Trading Strategies

Having a trading strategy is essential in surviving the world of day trading. The thing is there are a variety of different strategies available to use. When you first start day trading you may first trade all of them and then focus on the one or two that really work for you and suit your personality type. 

1. Trend Trading Strategies

Day trading trend strategies are by far the most common among day traders. This involves identifying an uptrend where there has been consistent buying historically and continuing to buy shares as the trend continues. 

Indicators such as moving averages are very useful in helping to identify the trend of the market and stick to it. For example, in the 15 minute chart of NVIDIA’s share price below, you will see that as the price crossed above the red line (20-period exponential moving average), the trend continued higher. 

When the price is above this moving average it means that the trend is up and more buyers are in control of the market. Furthermore, as this indicator is used heavily by algorithmic traders, as well as day traders, you can see that buyers stepped back in the market at the moving average. 

This is because the indicator also provides levels of support where day traders may think about purchasing more shares at the moving average line as an entry into the overall trend. The most common moving averages used by day traders are the 20 and 50 exponential moving averages. 

Some day traders will also add on additional indicators which show overbought situations to filter out for higher probability trading opportunities. Trend strategies can also be used for scalping small fluctuations in price. 

2. Countertrend Trading Strategies

Countertrend strategies are also popular among day traders and are particularly useful when the overall market is more range-based and not trending. However, most countertrend traders will still follow what the longer-term trend is on a higher timeframe. 

For example, day traders may choose to trade a 15 minute countertrend move which is in the direction of the 1 hour chart trend. This is also a way in finding stocks to day trade that provides a higher reward to risk ratio where you can make two, or three times what you risk. 

A common indicator that is used for countertrend day trading strategies is the stochastic oscillator. This is because the indicator is used to find reversal divergences in the market, as shown in the chart below. 

Reversal divergences for countertrend moves are highlighted above in green. There are two types: bullish reversal divergence and bearish reversal divergence. 

  • Bullish reversal divergence occurs when the price moves lower but the stochastics move higher. 
  • Bearish reversal divergence occurs when the price moves higher but the stochastics move lower.  

Essentially, divergences in a stock price can give you clues when a price trend is running out of steam and could potentially reverse causing a countertrend move. 

3. Reversion to Mean Trading Strategies

Reversion to mean trading strategies are primarily used when a stock is in a trading range. While most traders and investors prefer to trade a trending stock, sometimes the sentiment of the market is so low that the price is contained in a sideways trading range. 

As it is important for day traders to put their capital to work each day, being able to trade all the different market situations that could develop is essential. If a stock is in a trading range, a popular indicator for reversion to the mean trading strategies is Bollinger bands. 

Bollinger bands help to measure the volatility of a market. However, the upper and lower bands can also act as levels of support and resistance where the market could potentially turn. 

In reversion to the mean trading strategies, day traders will sell a stock when it gets to the top of the Bollinger band and trade it to the middle line which is typically the 20-period moving average. If the price comes to the lower Bollinger band, day traders would buy the stock and trade it back to the middle line. 

Essentially, traders are reverting the price back to the mean of the market which is considered to be the 20-period moving average. 

4. Gap Trading Strategies 

As stocks do not trade on a 24 hour basis, there can often be price gaps from where the market closed to where it opens the next day. These gaps are commonly traded by day traders as they occur when traders are scrambling to get in or out of positions at the opening bell. 

If you want to learn how to find a stock to day trade, then gap trading is one of the simplest ways to get started. This is because identifying the gap doesn’t require any type of technical analysis or indicators. 

There are a variety of different gaps that day traders can exploit. These include:

  1. Continuation gaps. These are gaps in a stock price which occur in the middle of a trend. These can act as confirmations that the overall trend is strong. 
  2. Exhaustion gaps. These are gaps in a stock price that occur towards the end of a trend and signal a failure of the market continuing in its preceding direction. 
  3. Breakaway gaps. These are gaps that occur after a trading range has developed, confirming a breakout from the range-based pattern. 

5. News Trading Strategies

Another popular way to learn how to pick a stock to day trade is to try and follow the news. As stocks represent a public company, there are regular market-moving news announcements. This could include details regarding product launches, management changes, sales numbers, hedge fund manager stakes, etc. 

There are a variety of ways to access the most important news announcements for a stock you are trading. The most effective way is to use the new eToro news feature. This also comes with a sentiment trends indicator so you can see how news is affecting the share price and whether it is moving higher or lower. 

News trading strategies are also popular with swing traders and when learning how to day trade penny stocks. This is because penny stocks are much smaller companies and can move big figures on a news announcement. 

Is Day Trading Safe?

Day trading can be safe but only if you use the right broker. After all, it’s your broker that holds your capital and executes your trades. It is essential to use a regulated broker that is highly regulated and transparent in its dealings. 

For example, eToro is regarded as a safe broker to day trade with. This is because eToro is authorised and regulated by the UK Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC). 

Not only is it regulated all around the world but it is also registered with FinCEN and a member of FINRA and SIPC which are all US-based regulations. Day trading is also much safer when your broker allows you to use stop loss and take profit orders with eToro does.   

How to Day Trade Stocks  

Follow the four-step process outlined below to get started. 

1. Create Your Account

You can open an account in just a few minutes. All you need are a few personal details to fill in the application form. 

2. Verify Your ID

You will need to comply with AML and KYC regulations. This includes verifying your identity. 

The two verification documents you will need are a valid passport or driver’s licence and a utility bill or bank account statement issued within the last three months. 

3. Deposit Funds

Once you have learnt how to find stock to day trade, you will need some funds in order to trade. 

4. Start Day Trading Stocks

Simply click the Trade icon to open a trading ticket to complete your order. 

Conclusion

If you want to find the most popular stocks for day trading then it’s important to have access to the right broker, platform and tools.

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