timothy sykes logo

Trading Tips-Tim Sykes Penny Stock

What are the Best Day Trading Strategies? Understand the Best Practices

Timothy SykesAvatar
Written by Timothy Sykes
Updated 9/16/2023 11 min read

Day trading is a high-speed, high-stakes world where fortunes can be made or lost — but mostly lost without the right day trading strategies.

Day trading isn’t about luck, it’s about strategy and discipline. It’s about understanding the market’s ebbs and flows and being informed buyers and sellers based on that understanding.

In this article, we’re going to explore some of the best day trading strategies out there. From technical indicators to types of trading strategies, we’ll cover the ins and outs of day trading and give you the tools you need to succeed.

What is Day Trading?

© Millionaire Media, LLC

Day trading is the practice of buying and selling financial instruments within the same trading day. It’s a fast-paced, high-energy form of trading that requires a keen eye for detail, a solid understanding of the market, and a robust strategy.

Be warned: you’ll need a solid foundation before you can become self-sufficient. Understanding the basics is crucial before diving into more complex strategies. It’s not just about making quick decisions; it’s about making informed decisions.

To get a comprehensive understanding of the fundamentals, explore the day trading basics. This will equip you with the necessary tools to navigate the fast-paced world of day trading.

Advantages of Day Trading

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

Day trading offers several advantages. It allows traders to take advantage of small price movements in highly liquid stocks or currencies. It also provides the potential for quick profits and the ability to work from anywhere with an internet connection.

It is not a get-rich-quick scheme; it’s a profession that requires skill, strategy, and a lot of hard work.

Disadvantages of Day Trading

But day trading is not without its risks. It requires a significant investment of time, as traders need to monitor the markets and execute trades throughout the trading day. It also carries a high level of risk, as rapid price fluctuations can lead to substantial losses. It’s not for the faint of heart, but for those who are willing to put in the work, it can be rewarding.

What are Technical Indicators in Day Trading?

Technical indicators are tools used by traders to analyze and predict price movements of financial instruments. They provide a way to quantify and visualize market trends, patterns, and behaviors.

They’re not crystal balls, but they can provide valuable insights into the market’s direction.

Moving Averages

Moving averages smooth out price data to create a trend-following indicator. They can help traders identify potential buy and sell signals and can be used to determine the overall trend.

Support and Resistance Levels

Support and resistance levels are key concepts in technical analysis. They represent the price levels at which a financial instrument has historically had difficulty moving beyond.

Understanding these levels can help traders make informed decisions about when to enter and exit trades.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It can help traders identify overbought or oversold conditions, potentially signaling a reversal in price direction.

Bollinger Bands

Bollinger Bands are a volatility indicator that creates a band around the moving average of a financial instrument. The width of the band varies based on the volatility of the prices.

When the band is narrow, it indicates low volatility, and when it’s wide, it indicates high volatility.

Volume Indicators

Volume indicators show the number of shares traded during a specific period. They can help traders understand the strength of a price move, as high volume often accompanies significant price changes.

Chart Patterns

Chart patterns are graphical representations of price movements that are used to identify trends and signals in the market. They can help traders predict future price movements.

Charting is essential to any day trading strategy. It gives you an example of something that has happened in the stock market in the past, and a case for a technique that may work in the future if certain things take place.

Candlestick Charts

Candlestick charts are a type of financial chart used to represent price movements. They provide information about the open, high, low, and close prices for a given period and can help traders identify market trends and potential reversal points.

Types of Day Trading Strategies

Tim Sykes checking his top penny stocks list in Italy
© Millionaire Media, LLC

There are many day trading strategies out there…

Here are the ones you need to know!

Equally important is the platform you use to execute your trades. The right platform can enhance your trading efficiency, provide valuable market insights, and help you implement your strategies effectively.

If you’re looking for a reliable and user-friendly platform, check out this guide on choosing the right trading platform for day traders.

Range Trading Strategy

Range trading is a strategy that involves trading within a specific price range. Traders identify support and resistance levels and make trades when the price approaches these levels.

Momentum Trading Strategy

Momentum trading involves buying and selling financial instruments based on recent price trends. Traders look for stocks or other assets that are moving in a particular direction with significant volume.

Price Action Trading Strategy

Price action trading involves making decisions based on the price movements of an asset, rather than relying on technical indicators. Traders use patterns and formations in price data to make their trading decisions.

Momentum Breakouts

Momentum breakouts occur when the price of an asset moves outside a defined support or resistance level with increased volume. Traders look for these breakouts as they often lead to significant price movements.

Scalping Strategy

Scalping is a strategy that involves making numerous trades within the day to profit from small price changes. It’s a fast-paced strategy that requires a high level of attention and quick decision-making.

Pullback Trading Strategy

Pullback trading involves buying an asset after it has undergone a temporary decline in a broader uptrend, in anticipation of the uptrend resuming.

Breakout Trading

Breakout trading involves entering a position as early as possible in a trend, often as soon as the price moves beyond a defined level of support or resistance.

News Trading

News trading involves making trades based on news events that are likely to impact the price of an asset. Traders need to stay informed about market news and be able to react quickly to changes.

10 Tips for Day Trading to Attain Success

top artificial intelligence stocks for 2021
© Millionaire Media, LLC

It’s about getting 1% better every day…

Here are some tips that will get you there.

Gain Maximum Knowledge

Knowledge is power in day trading. The more you know about the market, the better your chances of success. Stay informed about market trends, learn about different trading strategies, and continuously educate yourself about financial analysis.

Set Aside Funds

Day trading requires capital. Set aside funds that you can afford to lose, and don’t risk money that you need for essential expenses.

You don’t need a massive initial investment. In fact, you can start with a modest amount and gradually increase your investment as you gain experience and confidence. If you’re wondering how to start day trading with a smaller budget, check out my article on how to day trade without $25k.

Set Aside Proper Time

Day trading is time-consuming. It requires constant monitoring of the markets, so make sure you have enough time to dedicate to it.

Think of Starting Small

Start with a small number of shares or contracts and gradually increase your position size as you gain experience and confidence.

Time Your Trades

Timing is crucial in day trading. Pay attention to market hours, as the most significant price movements often occur at the market open and close.

Don’t Avoid Penny Stocks

Many investors and Wall Street types will tell you to stay away from penny stocks. That’s bad advice — those tips come from people who don’t know the difference between investing and trading.

If you know how to trade these sketchy stocks, it increases your options. Some of my best day trades have come from penny stocks — they’re more likely to breakout than large-cap stocks.

They’re how I’ve made $7.4 million in my trading career.

Just keep in mind, they’re more likely to fall apart than find real support. Trading penny stocks takes practice and research. You’ll also need to stay away from brokers that won’t let you trade OTC stocks, like Robinhood.

Cut Losses with the Help of Limit Orders

You can use limit orders to manage your risk. A limit order allows you to specify the maximum price you’re willing to pay or the minimum price you’re willing to accept.

Cutting losses is the most important step toward being a profitable trader. Check out my risk management strategy:

Have a Realistic Approach Towards Profits

Don’t expect to make huge profits right away. Day trading is a skill that takes time to develop. Be patient and focus on making consistent, small profits.

Stay Zen

Day trading can be stressful. It’s important to stay calm and composed, even when the market is volatile.

Stick to the Plan

Develop a trading plan and stick to it. Don’t let emotions drive your trading decisions.

Key Takeaways

how much does it cost to trade stocks
© Millionaire Media, LLC

Day trading is a high-risk, high-reward form of trading that requires a solid understanding of the market and a robust strategy. It’s not a game; it’s a serious business that requires serious strategies.

Trading isn’t rocket science. It’s a skill you build and work on like any other. Trading has changed my life, and I think this way of life should be open to more people…

I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out — and I’m the kind of guide.

We don’t accept everyone. If you’re up for the challenge — I want to hear from you.

Apply to the Trading Challenge here.

Trading is a battlefield. The more knowledge you have, the better prepared you’ll be.

Do you day trade? Let me know in the comments — I love hearing from my readers!

How much has this post helped you?

Leave a reply

Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”