​Trading Strategies > Intraday Trading​ > Day Trading for Dummies

​Day Trading ​for Dummies

​The ​Beginner's Guide To Day Trading
(20​20 edition)​

​Day trading - ​also called ​intraday trading - ​refers to the opening and closing of trades within the same ​day.

​This ​style of ​trading ​is very ​popular among ​beginners, as it ​is often ​portrayed ​as a quick, easy, and exciting way ​to ​make money.

​​Practically however, ​day ​trading is ​the most ​​challenging form of trading​, and ​those who try it ​typically ​fail.

It also doesn't help that the vast majority of trading "educators" out there are not profitable traders, but ​​savvy​ ​marketers ​pretending​​​ to be​ one.​

day trading for dummies

So before you do ​anything else​...​

​​Check ​Your Learning Sources

​Before ​taking any trading advice, first ​ensure that it's ​coming from someone who ​can demonstrate some level of ​trading competency​ on a ​3rd-party performance tracking platform.

This ​applies to the ​book ​authors you ​follow, ​trading experts you listen to, and online forums​ you visit​.​

In the spirit of transparency, therefore, here's my verified ​track record ​on Myfxbook:

Now with that out of the way, let's get down to business with ​this dummies guide ​to day trading.

Here are the topics we'll cover:

​How Do Day Traders Make Money?

Day traders ​identify ​short-term profit opportunities ​within the small price fluctuations of each day.

​They typically do this ​​with:

  1. ​News ​services,
  2. Technical indicators, and
  3. ​An understanding of ​order flow ​mechanics


1. ​News Services for Dummies

Short-term prices can be heavily​ influenced by political ​or economic news​.​

​Here​ ​are some example​s:

how do day traders make money

​Oct 2019: ​GBP/USD reacts to reports of a Brexit deal ​on Tuesday and Thursday

how day traders make money

​Aug 2019: ​USD/​JPY reacts to ​President Trump's​​ ​trade war escalation ​against China on Friday

day trading for dummies

​Aug 2019: ​​NZD/​USD reacts to ​​a surprise interest rate cut on Wednesday morning

​​To avoid being caught off-guard by such news, and perhaps to even profit from them, ​a day trader ​follows ​news ​websites such as ForexLive and subscribe to ​news ​notification ​services such as Ransquawk.

​The moment some market-moving news occurs, the trader is immediately informed. Then, ​he can quickly ​take steps to ​position his trades to benefit from the situation.

2. Technical Indicators​​​​ for Dummies

Almost all ​traders use ​​technical indicators to aid with trading decisions, and ​intraday traders are no exception.

​The only difference is that ​they tend to ​prefer to ​technical indicators that are more ​sensitive (responsive) to ​the immediate ​price ​moves.

For example, instead of using the ​simple moving average (SMA) indicator, ​they ​tend to prefer using the exponential moving average (EMA) indicator​ as ​it ​is more sensitive ​to the most recent ​fluctuations of the price.

day trading moving averages

​The EMA is more sensitive to price changes and reacts quicker than the SMA.

Intra​day traders also tend to​ prefer using ​shorter period settings ​on their technical indicators.

For example, rather than using the standard RSI period setting of 21, they might use a period ​setting of ​9.

intraday trading rsi

​A ​shorter period setting is more sensitive to price fluctuations

In the chart above, we see that the 9-period RSI is better able to identify ​overbought and oversold ​price levels​, compared to the 21-period RSI.

In this way, ​a ​shorter period setting​ allows ​intraday traders ​look for ​profit opportunities ​within the daily price ​​fluctuations​.
 

​3. ​Order Flow ​Mechanics for D​ummies

A competent ​day trader​ ​understands the ​subtleties of short-term price action and the ​mechanics of ​how trade orders are filled.

This gives him a perspective ​that goes beyond what is ​ordinarily displayed on a price chart.

intraday trading price action

​A layperson sees just a plain price chart

day trading order flow