As the name suggests, day traders are market participants that attempt to extract a profit  throughout the course of a single trading day or session.

 

Day traders fit into a subcategory of types of traders, but they can use one or many different strategies, such as news trading, trend trading, algorithmic trading etc. Some trading strategies are applicable across time frames, but others are exclusive to day traders, such as scalping. You can read more about trading strategies in our previous article here.

 

One of the biggest advantages of day trading is that it allows the trader to avoid the risk of loss from gaps, caused by the difference in price between market opening and closing. This is one reason why most brokers require more margin to hold positions overnight. 

 

If you’re wondering about the life and routine of a day trader, then read on. We’ll take you through an average day in the life of a day trader in this article.

 

 

 

A Day Trader's Breakfast

They say breakfast is the most important meal of the day, and for day traders, it’s a similar story.

 

With a fresh cup of coffee in hand and food for thought, let’s look at how such a trader prepares for the day ahead.

 

Preparing for the Trading Session

A day trader begins the day by reading any overnight news that may be significant, often in the form of a market recap. Then they will see what news is scheduled and try to gauge it’s potential importance. Some day traders exclusively trade news events, others prefer to avoid them and their often excessive volatility.

 

It’s usually at this stage that the day trader will market off significant price or liquidity levels that if touched, may provide potential entries for trades. Some day traders like to fade such levels, betting on a reversion back to the price mean. 

 

Other traders look for breakouts, hoping to catch the momentum of a quick change in price. Other traders still look for both types of trading setups, letting the context of the market dictate their decisions as per their trading plan.

 

 

A Day Trader's Lunch

The second part of the day is lunch. For a day trader, this is the possibly the most important part of the day. All the preparation comes to fruition, and success all comes down to execution. 

 

Tracking the Market

After scanning potential market-moving news and marking off important levels for breakfast, lunch marks the time for tracking the market in real-time and watching how price reacts.

 

Day traders analyze market trends and order flow behavior throughout the day, looking for opportunities to take their trading setups.

 

Executing Trades

Following a plan is a big part of trading, and the “breakfast” consumed previously is like a plan within a plan: an outline of how the day might play out, within the larger framework of the day trader’s strategy.

 

If a trading signal comes along in the form of a trading setup, perhaps at a level they marked off earlier (although not necessary—the market is dynamic), then it is up to the trader to execute the trade as best to their ability as possible. It is important not only to get a good entry price, but also to ensure that the position sizing is correct in accordance with their risk management rules, and that they have a stop loss in place.

 

Monitoring the News

As the trader is watching price and order flow and taking any trading setups that come along, it is also vital that they monitor some sort of news feed. While they should have noted important events on the trading calendar during breakfast, there is always the chance that a piece of breaking news will be release that could drastically affect their trades and shift sentiment for the day.

 

Breaking news usually means volatility, and most traders avoid trading around such events. But others actually thrive off it, and exclusively trade the news. You can read more out trading the news in our guide.

 

 

 

 

A Day Trader's Dinner

After a long day of trading, it’s now time for dinner. A typical day trader’s will go as follows:

 

Journaling Trades

Regardless of if the day resulted in a positive or negative PnL, it is important that the day trader journals their trades. Amongst other things, this will at least encourage good discipline—a critical skill when day trading.

 

Traders will record all the trades they made throghout the day, including details such as entry price, exit price, asset or asset class, the strategy or trading setup used, and any other information about the trade (sometimes including their emotional state before, during, and after a trade). This record of transactions helps the trader with the next course of dinner. 

 

Reviewing Performance

After detailing critical information about the day trades in their journal, they will then have data to review. Most important than profit or loss, the trader will analyse if they were able to follow their trading plan or not.

The trader can also compare the day’s performance in relation to the rest of the weeks and months prior. Occasionally, they may notice an anomaly which can be used for increasing their profitability. This may not always be a new trading setup, and could even be the opposite; e.g. avoid trading days during central bank announcements. 

 

Preparing for the Next Day

 

For “desert”, the trader looks ahead for future opportunities the next day. Perhaps something that happened today can give clues for what to keep an eye on tomorrow. 

As day traders like to say: the market will always be there tomorrow.

 

 

 

Conclusion

Day trading is one of the toughest skills to master in the entire financial industry, hence why it’s so well payed when done well.

 

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