Day trading involves the swift buying and selling of financial instruments within a single day, aiming to profit from small price movements. This strategy requires a well-defined plan to be successful, and without one, it can pose significant risks, especially to beginners.

Below, we'll take a look at ten day trading strategies for beginners, by Justin Kuepper from Investopedia.

1. Knowledge Is Power

Understanding the landscape of day trading is fundamental for novices. This encompasses not only the mechanics of trading but also staying updated with the latest stock market news and events that can influence stock prices, such as economic announcements and the Federal Reserve's interest rate decisions. It's important for traders to research and maintain a list of stocks they are interested in, continuously monitoring both specific company performance and broader market trends.

2. Set Aside Funds

Financial preparation is another critical aspect, where traders need to decide on the amount of capital they are willing to risk on each trade. Typically, seasoned day traders might risk less than 1% to 2% of their trading account on a single trade. For example, with a $40,000 trading account, a trader might limit their risk to $200 per trade (0.5% of capital). Traders are advised to only use surplus funds that they are prepared to potentially lose.

3. Set Aside Time

Time investment is crucial in day trading. Traders need to dedicate a significant portion of their day to this activity, as it requires constant market monitoring to identify trading opportunities as they arise. This level of commitment might not be suitable for individuals with limited time.

4. Start Small

For beginners, a recommended strategy is to start with a small number of stocks, perhaps one to two, to simplify the tracking process. The advent of fractional shares trading has also made it possible to invest smaller amounts in high-value stocks, making day trading more accessible.

5. Avoid Penny Stocks

Steering clear of penny stocks is advised due to their lack of liquidity and the high risk associated with their potential delisting from major stock exchanges. These stocks are less likely to provide significant returns and are more suitable for experienced traders who have conducted thorough research.

6. Time Those Trades

Timing plays a significant role in day trading. The market tends to be more volatile during the opening and closing times, which can present opportunities but also greater risk. Beginners might benefit from observing market behavior during the first 15 to 20 minutes and avoiding trading during the most volatile periods until they gain more experience.

7. Cut Losses With Limit Orders

When entering and exiting trades, it's crucial to select the appropriate order type—be it market orders or limit orders. Market orders are executed immediately at the current available price, offering no guarantee on the execution price. This type of order is suitable for traders looking to quickly enter or exit the market without a preference for a specific execution price.

On the other hand, limit orders provide traders with price certainty, though execution is not guaranteed. By setting a specific price for a limit order, traders gain more control over their transactions, allowing for more strategic trading. This can be particularly beneficial in managing losses during market reversals, as it prevents trades from executing at unfavorable prices. However, the trade-off is that if the market price does not meet the limit order's criteria, the trade will not be executed, leaving the trader's position unchanged.

Advanced traders might also integrate options strategies into their trading approach to further mitigate risk. These strategies can provide additional layers of protection and strategic opportunities, catering to more experienced traders who are familiar with the complexities of options trading.

8. Be Realistic About Profits

It's essential for traders to maintain realistic expectations about profits. Even successful traders might only profit from 50% to 60% of their trades, but by managing their losses and ensuring their winning trades outweigh the losing ones, they can still achieve profitability.

9. Stay Cool

Emotional discipline is key in day trading. Traders must learn to keep their emotions in check and make decisions based on logic and their trading strategy, not on impulse or emotion.

10. Stick to the Plan

Sticking to a pre-defined trading plan and resisting the temptation to deviate from it based on emotional reactions is crucial for long-term success in day trading. It is important to follow your formula closely rather than try to chase profits. Don't let your emotions get the best of you and make you abandon your strategy. Bear in mind a mantra of day traders: plan your trade and trade your plan.