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Day Trading Overview

Jul 28, 2025

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Overview

This lecture provides a comprehensive, step-by-step guide for beginners to become consistently profitable day traders, covering core concepts, essential strategies, analysis, risk management, and practical routines.

Introduction to Day Trading

  • Day trading is predicting the short-term price movement (up or down) of assets like stocks, forex, crypto, or futures.
  • Unlike investing, day trading focuses on short holding periods and making quick profits.
  • You can profit whether prices rise (bull market) or fall (bear market).
  • Day trading offers financial, time, and location freedom.

Myths and Facts About Day Trading

  • Day trading is legitimate; many people make real money.
  • You do not need a large amount of capital; starting with as little as $10 is possible.
  • Trading can be done in 30 minutes to 2 hours daily, not all day.
  • Profits can be achieved in 3-12 months with discipline and learning.
  • You do not need expensive equipment; a phone or basic laptop is sufficient.

Main Types of Markets

  • Forex: Trading currency pairs (e.g., EUR/USD), open 24/5, highly liquid, small accounts possible.
  • Futures: Trading contracts for commodities, indices, or energy; highly regulated, low fees, fast.
  • Options & Stocks: Also possible but not focus of this course.
  • Crypto: Trading digital assets’ price movements.
  • Focus will be on Forex and Futures.

Key Market Concepts

  • Trading Sessions: Asian (7pm-4am EST, slowest), London (3am-12pm EST, 2nd most active), New York (8am-5pm EST, most active). London/New York overlap (8am-12pm EST) has highest volume.
  • Trading Pairs: Popular Forex pairs include EUR/USD, USD/JPY, GBP/USD; popular Futures include ES (S&P 500), NQ (NASDAQ), GC (Gold), CL (Crude Oil).

Types of Analysis

  • Fundamental Analysis: Uses news and economic events to predict market movements (use sites like forexfactory.com).
  • Technical Analysis: Uses chart patterns and historical price data to forecast direction.

Chart Basics & Candlesticks

  • Use TradingView or similar platforms to view and analyze charts.
  • Candlesticks show opening, closing, high, and low prices for a set time.
  • Bullish candles (green) mean price increased; bearish (red) mean price decreased.
  • Wicks show how far price moved beyond open/close.

Key Technical Patterns & Tools

  • Support: Price level where buying interest prevents price from falling lower.
  • Resistance: Price level where selling interest prevents price from rising higher.
  • Trend Lines: Lines connecting swing highs or lows to identify uptrends/downtrends.
  • Key Levels: Major turning points—change-of-direction zones that remain relevant over time.
  • Trading Phases: Markets can be consolidating (sideways), trending, or breaking out.

Essential Candlestick Patterns

  • Hammer: Long wick below, small body—signals reversal upwards.
  • Shooting Star: Long wick above, small body—signals reversal downwards.
  • Doji: Small body, equal wicks—indicates indecision/reversal.
  • Bullish/Bearish Engulfing: Larger candle engulfs previous one, signals trend continuation/reversal.

Indicators & Tools

  • VWAP: Volume Weighted Average Price; shows average price weighted by volume.
  • EMA: Exponential Moving Average; shows average price over a period.
  • Killzones: Indicators for session start times.
  • Volume: Measures buy/sell activity for each time period.

Types of Traders

  • Scalper: Targets small moves, trades last seconds to minutes.
  • Intraday Trader (Day Trader): Holds trades minutes to hours, closes within same day.
  • Swing Trader: Holds trades for days or weeks.

Core Trading Strategies

  1. Support/Resistance Bounce: Enter after confirmation pattern near key zone; stop below/above recent swing; target prior swing highs/lows.
  2. Squeeze/Breakout: Identify price “squeezing” between trend lines; enter after breakout; use nearby swing high/low for stop/target.
  3. Heikin Ashi Scalping: Use 1-min chart, Heikin Ashi candles, VWAP filter, look for clean pullbacks and high-volume Doji for entry.

Backtesting & Optimization

  • Use TradingView’s replay function or other tools to simulate trading setups and strategies.
  • Journal every trade: date/time, instrument, direction, position size, risk, strategy, reason for entry/exit, outcome.
  • Review and optimize strategies based on data (win rate, risk-reward, time of day, etc).

Risk Management & Trading Plans

  • Never risk more than 3% of account per trade (beginners).
  • Use demo accounts and small live accounts before funding larger/trading prop firm accounts.
  • Develop and stick to a written trading plan with set rules, including consequences for breaking rules (e.g., take an ice bath).

Brokers & Platforms

  • Broker: Holds your funds, executes trades. Examples: OspreyFX (Forex), Tradovate/TradeLocker (Futures).
  • Platform: Software to analyze, enter, and manage trades (can be same as broker or separate).
  • Ensure real-time data subscription for accurate trading.

Becoming Consistent & Profitable

  • Focus on probabilities, not single trades.
  • Only take “A+ setups” that fit strategy criteria.
  • Journal and review trades regularly to identify and fix mistakes.
  • Patience, discipline, and psychology are as important as technical skills.

Key Terms & Definitions

  • Day Trading — Buying/selling assets within the same day for quick profits.
  • Candlestick — A visual chart bar showing open, high, low, and close prices for a time period.
  • Support/Resistance — Price zones where reversal or pause tends to happen.
  • Trend — General direction of price movement (up/down/sideways).
  • Fundamental Analysis — Decisions based on news, economics.
  • Technical Analysis — Decisions based on price charts and patterns.
  • VWAP/EMA — Indicators that help assess price trends and entry points.
  • Lot/Contract Size — Number of units traded per order.
  • Win Rate — Percentage of trades closed at profit.
  • Risk-Reward Ratio (RR) — Amount risked vs. amount aimed to gain.
  • Backtesting — Simulating trades on past data to test strategies.
  • Prop Firm — Company allowing you to trade larger funds after passing evaluation.

Action Items / Next Steps

  • Open a demo account and practice core strategies.
  • Set up TradingView and familiarize with chart/indicator tools.
  • Backtest at least 50 days of trades and log results.
  • Write and strictly follow a personal trading plan.
  • Research and choose a broker/platform suited for your market.
  • Review key candlestick patterns and technical analysis basics.
  • Practice risk management: never risk more than 3% per trade.
  • Start journaling every trade for review and optimization.
  • (If ready) Explore prop firm accounts for scaling.

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