Day Trading Stocks in 2021: Everything You Need to Know

day trading stocks

What’s the best way to start day trading stocks in 2021? The answer to that depends on you…

Day trading has become super popular since the 2020 hot market that’s now running into 2021. I’ve been trading for over 20 years, and I’ve never seen a stock market like this.

What too many new traders don’t realize is that day trading is hard and comes with risks. I want to teach you how to start day trading while keeping that in mind.

So whether you’re a beginner or you’ve been around for a while, keep reading. I’ll give you some tips and tricks to help you become a better day trader, but you need to figure out what’s best for you through study and practice…

What Is Day Trading Stocks?

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Day trading is when someone opens and closes a position in a single trading day. The whole trade takes place between the market open and the close.

Day traders can hold positions overnight … or even longer if they like the setup.

But when a trader holds stocks overnight or longer, it’s not considered day trading. It’s swing trading, investing, or something else.

Day Trading Stocks vs. Stock Investing

day trading stocks vs stock investing
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I cringe when people call me a ‘penny stock investor.’ It shows they don’t understand the difference between day trading and investing…

Remember what I just said? Day trading is when a trade is opened and closed within a single trading day. Day traders like to follow market momentum. They’re constantly finding new stocks to buy and sell. 

Investing is completely different. It’s when someone buys a stock and holds it long term, hoping it will rise. Investors tend to focus on dividends and a company’s consistent growth.

I don’t think investing is a bad thing. But I work with lots of students who have small accounts, and investing won’t do much for them. Even with a 20% gain on the year and a 5% dividend yield, they’ll still only make small profits.

Day trading can be different. Penny stocks can move 100% or more in a single day. If you’re prepared, you can take the meat of the move and potentially see bigger gains in a day than you could in a whole year of investing in large-cap stocks.

What Makes Day Trading Stocks Risky?

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Day trading isn’t all butterflies and rainbows. It comes with risks. That’s why most traders lose.

Some of the biggest risks I’ve seen in my career are illiquidity, volatility, fraud, and halts. Here’s why…

Illiquidity was part of the reason I lost over $500,000 in a single trade. I got stuck in a stock that I couldn’t get out of. I didn’t follow my #1 rule — cut losses quickly. And by the time I was willing to cut my losses, the stock was so illiquid that I couldn’t sell my shares. You can read about it in my book, “An American Hedge Fund.”

Volatility is a big problem for a lot of beginning traders. They buy into the most volatile stocks. And instead of taking a small gain or a small loss, they hold too long and watch the price fall. They’re bag holders, hoping the stock will go back up. Don’t hold and hope! It’s not a strategy.

Halts and fraud are risks that go along with holding and illiquidity. A company might find itself the subject of a fraud investigation — bad news for the stock. If you’re stuck holding it when the news comes out, you might not have a chance to get out and cut losses. The same applies if a stock is halted for whatever reason.

If you put in the time and study up, you’ll have a shot at minimizing the risks and maximizing the potential gains. Always expect the worst out of a company. You’ll never be disappointed.

How to Start Day Trading Stocks

People are always asking me how to start day trading stocks. My answer? Just do it. Of course, there are a few steps to take first…

The first step is to open a brokerage account. You need one of those to start stock trading.

Once you’ve set up an account, transfer some funds over to use for trading. Don’t put any money on the line if you aren’t willing to lose it — day trading can be risky. I don’t want you to lose your rent money because you risked too much on a trade.

Remember to keep your position size small at first while you’re studying the patterns. You can start adding funds once you’re comfortable.

It’s easy to come up with excuses not to get started. Let me tell you, though … The best way to learn how to become a self-sufficient trader is to put in the time. You may need to experience 500, or maybe even 5,000, trades before you fully understand the process.

How Do I Find Stocks to Day Trade?

how do i find stocks to day trading stocks
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Doing your due diligence is critical to finding the best stocks to day trade…

You’ll need a good stock screener like the one on StocksToTrade. It’s the first thing I check every morning. I think it’s the best platform for day traders— after all, I helped design it to fit my trading strategies. (I’m also an investor in STT.)

StocksToTrade has tons of great features, including killer charts that can help you find the best stocks that fit your trading strategies. Click here to try it out. A 14-day trial is just $7…

Day Trading Strategies for Beginners

Day trading for beginners can be tough. Most newbie traders lose. But don’t let that get you down — if you put in the time, you could see big rewards.

So I’ll go over some day trading strategies that can help you stay in the game and maximize potential gains. Other traders have had success with these — but you need to find your strategy through trial and error…

Momentum Trading

Momentum trading is when you ride the hype from a catalyst that affects the price action. Keep in mind that momentum trading relies heavily on volume. Without volume, there’s no momentum.

This is my favorite day trading strategy. I love it because it can be so predictable. I’ve made the bulk of my profits on momentum penny stocks.*

(*Note: My trading results aren’t typical. I’ve spent years developing exceptional trading skills and knowledge. Always remember trading is risky, and most traders lose. Never risk more than you can afford to lose.)

Daily Pivots

This day trading strategy focuses on buying the lows and selling the highs throughout the trading day. Traders using this strategy simply buy and sell when they see signs of a reversal in price action.

Fading

Fading is a trading strategy that involves short selling. When a trader looks to fade a stock, they buy when they assume that the stock is overbought.

This might seem simple, but it can be dangerous. You can lose a lot by shorting a stock, so if you’re looking to fade, make sure to prepare. And I mean prepare.

Day Trading Tools

day trading stocks and tools
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There are lots of tools that can help you learn to master different day trading strategies. I’d say my Trading Challenge is one of the best.

The Challenge has over 6,000 video lessons, DVDs, live webinars, and arguably the best trading chat room around. I’ve had several students go on to be top traders and mentors in the chat room, where they help beginners find their trading styles.

I brag about my Challenge because it’s a great tool that’s helped many traders turn their small accounts into six, seven, and even eight figures.* 

They were able to do that because they worked hard and didn’t take days off. The Challenge isn’t for you if you expect to be an instant millionaire.

Not everyone makes it in. You have to go through an interview process to make sure you’re a good fit. If you think you’re up for it, apply to be part of the Challenge today.

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Day Trading Rules

Day trading rules are different margin accounts and cash accounts. First, here’s the big rule for margin accounts that you need to look out for…

If you have a margin account and less than $25,000 in your account, you’re subject to the pattern day trader (PDT) rule. That means you can only make three day trades in a rolling five-day period. The period starts with the first day trade.

If you make four day trades in the rolling five-day period and you have less than $25,000, you’ll be labeled a pattern day trader and your account will be restricted.

Now, for cash accounts…

The most commonly violated day trading rule for cash accounts is the ban on free riding, which is the sale of securities bought with unsettled funds. If you buy or sell shares with the proceeds of another trade before the trade has settled, your account will be restricted. 

When you buy or sell stock, it takes a couple of days for the funds to settle. Traders with cash accounts need to be sure their funds have settled before they go buying and selling all over the place…

What Are the Hottest Stocks for Day Trading?

what are the hottest day trading stocks
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What do you think the hottest stocks are for day trading? I hope you didn’t say Apple or Amazon. Those are great companies, but they’re not going to make the big moves that day traders are looking for.

The hottest stocks for day trading are penny stocks. I know big-time investors give penny stocks a bad rap … But I think penny stocks are the best for day trading.

They can make the biggest moves in the shortest amount of time. I’ve seen penny stocks double, triple, and even quadruple within a single trading day. Have you ever seen Apple do that? I didn’t think so.

3 Hottest Day Trading Stocks to Watch in 2021

Let’s go over a few stocks that had huge moves in 2020 and have the potential to do the same in 2021…

AeroCentury Corp. (AMEX: ACY)

ACY acquires used aircraft and engines and leases them to foreign and domestic regional airlines.

This may not have been the hottest sector in 2020, but I have a reason for telling you to keep an eye on it in 2021.

Here’s the three-month chart…

day trading stocks acy 3 month
ACY chart: 3-month, 1-day candles — courtesy of StocksToTrade.com

I bring this stock up as one to watch in 2021 because of its crazy end to 2020. You can see it basically did nothing before the end of the year, then had a huge spike. It went all the way from about $2 to $38 … and hard and fast soon after.

Keep this stock on your radar and be ready for future runs. It could make a similar move. Remember, history tends to rhyme.

SPI Energy Co. (NASDAQ: SPI)

SPI is engaged in photovoltaic solutions for residential, business, and government customers. The company uses solar energy for its services.

Look at this six-month chart…

day trading stocks spi 6 month
SPI chart: 6-month, 1-day candles — courtesy of StocksToTrade.com

SPI has a similar chart to ACY, except this happened a few months earlier. This stock went from about $1 to $46 in just a few hours. The volume was insane, too.

Former runners tend to run again. Be ready if you see positive news and increased volume. Who knows what might happen next time…

CytoDyn Inc. (OTCQB: CYDY)

CYDY is a biotech company that focuses on humanized monoclonal antibodies to treat HIV. Their products work to protect cells in the human body from being infected with HIV.

Check out the one-year chart for the company…

day trading stocks cydy
CYDY chart: 1-year, 1-day candles — courtesy of StocksToTrade.com

I’ve talked a lot about this stock this year. That’s because it followed some of my patterns almost perfectly.

It trended up for days and had supernovas on the way. When it fell, it was almost the perfect morning panic dip buy, and my top students and I banked on it.* Keep an eye on this ticker…

Frequently Asked Questions About Day Trading Stocks

frequently asked questions day trading stocks
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What Is Intraday Trading?

Intraday trading takes place within a single trading day. The term intraday is also used to refer to new highs or lows for a certain security within a day. Traders use intraday price movements to try to benefit from short-term price fluctuations.

What Are the Best Times to Day Trade?

The best times to day trade are up to you. But volume is usually best right after the market opens and right before the close. Increased volume can make moves more predictable. If you focus on these times, it can help you learn the patterns and as you work to become a self-sufficient trader.

How Much Do Day Traders Make a Day?

There’s no solid answer to this question. Each trader makes or loses a different amount of money each trading day. I can’t even tell you how much I make in a day because every day is different. Every year is different, too. So study hard, prepare, be ready to adapt, and take advantage of opportunities when they present themselves.

Can You Day Trade With $500?

Technically, yes. But you need to trade small. Trading with $500 doesn’t leave much room for error. And errors are common for beginners. Maybe paper trade until you can save more. Whatever amount you start with, study hard and trade smart so you can grow your account.

What Are the Best Day Trading Stocks Under $5?

In my opinion, the best day trading stocks under $5 are momentum penny stocks. Momentum penny stocks can draw in big volume, which can make for big moves. Take the time to study momentum penny stocks, and you’ll know why I say they’re the best for day trading.

Conclusion: Should You Start Day Trading Stocks?

conclusion day trading stocks
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I’ve gone over a few key things you need to understand if you want to start day trading stocks. You need to spend a lot of time preparing if you want to maximize every trade.

There are some great tools that can help you prepare for whatever the stock market brings in 2021. You can apply for my Trading Challenge to take your education to the next level. StocksToTrade can help you find the hottest stocks that fit your strategy, so you can stay one step ahead.

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Even with all the risks and rules that come with day trading, I think there’s no better time to start day trading stocks. If you’re dedicated and work hard, you may find it’s worth the effort…

What do you think? Are you ready to start day trading stocks? Let me know in the comments.

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