What is day trading?

How it works

A day trader gets in and out on the same day. By closing everything before the session ends, they avoid overnight risk: news or earnings that make the price open the next day far from the previous close. In exchange, they work with smaller moves and need to trade more often.

Positions usually last from minutes to a few hours. Because intraday moves are smaller than multi-day moves, a day trader needs tight stops and precise entries, and a single bad fill weighs more heavily on the results.

Day traders typically use 1- to 15-minute charts and intraday reference points such as VWAP (the session’s volume-weighted average price) and the opening range (the high and low of the first few minutes).

The rhythm of a session

For US stocks, the regular session runs from 9:30 a.m. to 4:00 p.m. New York time. The first hour concentrates volume and volatility; midday tends to be slower, and the last hour picks up again. Many day traders build their watchlist before the open and trade only during the most active hours.

Costs weigh more

Because of the frequency, commissions, the spread, and slippage add up fast.

Hypothetical example: if each trade costs you $3 in total between commission and spread and you make 4 a day, you spend $12 a day. Over 20 sessions that’s $240 a month, which your strategy has to beat before it leaves you a single dollar of profit. That’s why, before choosing this style, it’s worth comparing commissions and execution quality across several brokers.

Rules and risk

For more than two decades, the pattern day trader rule required minimum capital for frequent day trading in US margin accounts. In 2026 the SEC approved replacing it with intraday margin requirements, and brokers have until October 2027 to implement the change. Check with your broker which rules apply today.

Risk is managed by the day: a fixed daily loss limit that ends the session once it’s hit. Without that limit, one bad morning can wipe out weeks of work, especially if you use leverage.

Is it for you?

Before choosing this style, answer honestly:

• Time: can you be in front of the screen during the most active hours? For readers outside the US this is a real constraint: in much of Latin America the New York session falls during working hours, and in Spain it runs from afternoon into night (3:30 to 10:00 p.m.).
• Temperament: do you make quick decisions without freezing up or acting on impulse after a loss?
• Costs: do your broker and your capital keep commissions and spread from eating your results?
• Data: are you willing to practice in a simulator first and log every trade?

If the answer to several of these is no, a slower style such as swing trading may be a better fit, and that doesn’t mean giving up on learning to trade.