If you’ve ever entered a market position, long or short, only to close it out before the end of the trading day, you’ve just pulled off a “day trade.” Maybe you did it intentionally or accidentally; maybe you gained a profit or sustained a loss. Either way, it’s a day trade.

Day trading is a style of speculation in which a trader buys and sells a financial instrument within the same trading day (intraday), never holding an open position beyond the market close.

So, what’s the big deal with day trading besides duration? A lot, as a change in duration can often make a big difference in how you trade. It can mean higher trading costs and more risk (not less, as some traders seem to think). It can mean frequent yet smaller trading opportunities. It can subject you to greater volatility, for better or worse. And it may require a change in mindset, strategy, and risk management.

So, the question now is what might it take to day trade responsibly and successfully?

What You Might Need to Become a Successful Day Trader

Day trading is a huge topic; one that exceeds the scope of this introduction. But here are a few critical things you’ll need before getting started.

A Method Designed Specifically for Day Trading: You’ve heard some traders saying that day trading is like longer-term position trading or investing but on an ultra-short timeframe. Not necessarily true. Position traders often use daily to weekly charts. Price movements on a wider time frame tend to be driven by fundamental or longer-term sentiment factors. In contrast, day traders can sometimes use minute charts (or even tick charts) to capture ultra-short term price swings. Those swings, often reflecting micro supply and demand, are market noise in the wider context of economic activity. So, if you’re going to trade a timeframe that may be dense with noise, you might not want to use a system that’s designed mainly for longer-term supply and demand conditions.

A Money Management Strategy Designed for Day Trading: Let’s say a trader takes a position risking 2% of her trading account. She’s attempting a “swing trade” that might last a few days to a week. She also makes, on average, four swing trades a month, depending on her overall trading performance (she may trade more or less). At this rate, 2% risk seems reasonable. But what if your day trading method averages 10 trades a day—meaning 50 trades a week, and 200 trades a month? What if you end up with a long losing streak? In that case, 2% risk might be a bit too “risky,” and you’d have to tone it down, risk-wise. The main point is that your money management should fit your day trading strategy to avoid large losses.

A Trading Platform That’s Day-Trading Friendly: If you need to execute trades quickly, then anything less than a one-click or two-click solution might slow you down. If you need to follow multiple charts to make a day trading decision, then a platform with only one chart might not be suitable. If you need to see market depth, order flow, or a specific set of chart indicators, then, obviously, you should use a platform that provides everything you need. Day trading is about speed in decision and execution. Your platform shouldn’t get in the way of your strategy.

An Economic Calendar: Day traders often make the erroneous assumption that because they’re focusing on a trade that may last a few minutes or a few hours, they have no need to pay attention to the bigger economic picture. Big mistake. How many day traders held this assumption only to see the market drastically move against them due to a scheduled interest rate, employment, inflation, sentiment, or earnings event? Don’t let this happen to you. Keep an eye out for economic reports scheduled in your economic calendar, and don’t get T-boned by anything that you could have seen coming days away. It’s not only embarrassing, it can be costly.

The Bottom Line

Day trading is a short-term style of speculation that can last seconds, minutes, or hours—all within an intraday span. It requires a certain mindset, personality, and skills to pull off successfully. If you’re looking to day trade on a regular basis, be sure to have all the necessary tools in place before you jump in. Day trading isn’t for everyone, but if it suits your personality, and if you can make it work, then it might be a worthwhile tool to add to your financial arsenal.

Day Trading with ATC Brokers

Now that you’re up to speed on leverage in forex, why not set up a demo account to develop your strategies today. Or, if you’ve done your research and are ready to trade forex right away, sign up now for instant access to the following benefits:

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• An up-to-date economic calendar