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How Does Day Trading Work?


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Professional trader and Raging Bull Trading educator Kyle Dennis provides an overview of how day trading works.

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How Does Day Trading Work?

  1. 1. How Does Day Trading Work? Kyle Dennis
  2. 2. Day trading is not considered to be investing in the traditional sense, because you're not really investing in the growth of a few select companies. Instead of maintaining or growing investment over the course of five or 10 years, day trading involves a quick buy and sell process intended to earn a quick gain.
  3. 3. Raising Capital To get started, you should have a minimum of $1,000, but starting out with more is always better. Some people borrow their initial start-up capital, but this can put you at a bigger disadvantage. If you're not successful right away, you will have lost your capital, and you will still owe the money you borrowed.
  4. 4. Make Your First Investment Your goal is to identify highly liquid stocks and buy $1,000 worth of shares or more in that stock. Once the purchase has been made, you will need to monitor that stock's performance in the market. Your next objective is to sell as soon as the stock price increases by a few cents.
  5. 5. Remember Tax Laws Tax laws are applied differently for stocks that are owned for a shorter period of time. A stock you own for one year or longer will be subject to a 20% tax, but stocks you own for less than one year are considered personal gains. This type of income is taxed at a 35% rate.
  6. 6. Kyle Dennis While day trading can be lucrative, it also comes with higher risks than traditional investing. As long as you have the patience and the disposable income required to get started, you may be able to use day trading to grow your wealth. However, just like any type of investment, success depends on developing a strategy based on research and a keen eye for good investments.