The brokerage industry is undergoing frequent changes. In 2015, Robinhood began offering customers to trade stocks for free. At this time, retail brokers typically charged $7.99 per trade from investors, and it sounded entirely implausible that a broker would offer $0 commission trades. Nevertheless, the business model was that successful that all leading online brokers like TD Ameritrade and Charles Schwab followed last year. They now offer commission-free trading for U.S. listed stocks and ETFs to their clients.

The combination of $0 commission offers and the work-from-home orders during the pandemic led to a sharp increase of new investors getting involved with day trading. It was a unique opportunity to trade from home while working from home. Reddit forums like WallStreetBets saw a parabolic growth in new members, and the trading volume in stocks like AMC and Gamestop began to explode. The demand is that high that now even PayPal considers an entry into stock trading.

But is this type of trading right for you? Here are the seven most important things you need to know about day trading before getting started.

1. Education

Day trading is the king's class of trading. Retail traders compete against the best institutional investors and trading algorithms. That makes it essential to only start day trading with proper education and knowledge.

It is like with any other profession. Only the best-educated people get the best jobs and earn high incomes. The same goes for day trading, and only well-educated day traders have a chance to make profits in the long run.

Various free day trading courses are available on YouTube, while some lower-priced courses can be found on platforms such as Udemy. However, investors should keep in mind that the price paid for a class needs to be reasonable relative to the overall available budget.

2. Trading Simulator

Once a trader has gone down the path of continuing education, it is tempting to start trading with real money right from the first trade. But a trading simulator is an extra cushion of safety and an essential tool for success. A day trader should use the simulator until he continuously makes money day trading.

A day trading simulator needs to have real-time market data, hot-key functionalities and charting capabilities. In addition, it is beneficial if the platform allows setting parameters like trading commissions and exchange fees for a realistic simulated trading result.

After three months, the collected data gives a clear picture of the overall profitability, maximum drawdown, average profit per trade and the trading fees. Traders should use the data to adjust the trading strategy based on the finding or slowly start trading in a real-money environment.

3. Trade Automation

Trade automation can take the mental pressure out of the trading process. Trading robots, Artificial Intelligence algorithms, big data based strategy deployment, and automated order routing can control the entire trading process.

Trading tools like Trade Ideas specialize in providing day traders an end-to-end solution where a stock screener scans for valid trade setups based on A.I. algo trading strategies and automatically routes the order via a brokerage API to the preferred stock exchange.

The Trade Ideas review published at is a great read and explains in most detail how the market scans, strategy development, backtesting, and automated trading works. With the right tools, the entire trading process takes only fractions of a second without the trader intervening in the transaction manually.

4. Account Minimum

Day trading is possible for everyone, but the number of executed trades defines the account minimum requirements. Most brokers in the United States offer two account types; cash accounts and margin accounts.

With a cash account, the exact value of cash is the maximum value of a trading position. Once a position is closed, it takes about two business days before the cash is once again available for trading. While, in theory, this enables investors to day trade by opening and closing a position on the same trading day, it is not practicable since the trade settlement takes too much time.

A typical day trader executes more than 10 trades per day. And that's a problem for investors with moderate capital because a margin account is required once a trader executes more than 3 day trades within 5 business days.

A margin account needs a maintained minimum of $25,000 if the account is held with a broker in the United States. The investor can day trade unlimited times as long as his account remains above $25,000. However, once the account value falls below $25,000 - the account gets locked for day trading. Open positions can be closed, but it is then not possible to open new positions.

5. Time Involvement

The regular trading hours on the New York Stock Exchange and Nasdaq start at 9:30 AM EST and last until 4 PM EST. Thus, the most volatile trading times are during the first 30 minutes, while the price per share often fluctuates in the range of the first 30 minutes during the rest of the day.

Most day traders focus on the volatile times and stocks with a high relative volume, significant opening gaps and major news such as earnings announcements.

Depending on where you live and your day job, it can be difficult to be online and fully concentrated during the most volatile market times. Those who day trade during choppy market hours will quickly realize that it becomes difficult to make money day trading without volatility.

6. Trading Platform

Speed is crucial for day trading success - the faster the order routing, the better the trade executions. Mobile apps are great for investors and swing traders, but day traders need desktop solutions installed on a personal computer.

Instead of W-LAN, traders should use traditional LAN with cables, power failure protection needs to be in place, and the broker support should be available by phone fast if a position needs to be closed with broker assistance. That's especially important if the leverage of a margin account is used trading massive position sizes where even small price fluctuations influence the account balance significantly.

Retail brokers offer commission-free trading with good trading platforms, but they sell the order flow to third parties. Direct market access brokers offer faster trade executions with specific order routing features and high-end day trading platforms. However, those brokers charge commissions since they route the orders directly to the selected stock exchange.

7. Plan the Trade and Trade the Plan

Setting realistic goals is crucial for any investment. Be it entrepreneurship, real estate investing, or day trading - it is important to define goals properly, track the process and make notes about the achievements and learnings.

The plan starts with a calculation of the expected expenses involved with day trading activities. It is a business case that includes the exact trading plan with trading strategy details and clearly defined rules.

Only a clear set of rules will enable the investor to track the success properly and make targeted adjustments.


Day trading is one of the most speculative investment styles, and only a small portion of day traders make money in the long run. Propper education and the use of high-end trading tools are a must to become successful. The monthly costs can shoot up quickly, and the time involvement is exceptionally high. Nevertheless, those who succeed with day trading make tremendous money trading from home. It is crucial to carefully consider if day trading is the right investment style and using a real-time day trading simulator is the key to success.