Buying and selling securities from the comfort of your own home within a day and making high profits in the process: this is exactly what day trading with shares promises! There is a considerable risk involved, but also the chance of attractive returns.
We have summarized important basics and tips to help beginners and advanced day traders. In this article, you will also find out which securities are particularly suitable for trading shares.
The most important in a nutshell
- Day trading with shares is a very risky approach in which most investors lose money.
- Volatile shares with high liquidity are particularly suitable for day trading and offer the opportunity for high profits.
- You need a strategy, discipline, time and capital to start day trading.
- Some tips and tricks can help, but it remains a risky undertaking
What is day trading with shares?
The international financial markets offer us thousands of different opportunities to make a profit. From the Swing Trading about High frequency trading up to the AI Trading. But no method attracts more attention than day trading: the risky trading of shares and the like that promises high profits.
This form of active trading is characterized by its particular speed. Positions on the stock exchange can last from a few seconds (so-called "Scalping") up to a maximum of one trading day.
At the closing bell of the stock exchanges, day traders have also closed all positions. This allows them to avoid the unpredictable and often significant price jumps that can occur between trading days.
- Leveraged products are used to achieve worthwhile profits despite short time frames.
- All price changes of the respective underlying are multiplied by the specified leverage factor.
- Profits, but also losses, are amplified by the specified factor, thus increasing risk and opportunities.
- Traders use both long and short positions. They profit from rising prices through the gain and through a Short sale with falling prices.
The key to success is, of course, correctly predicting price developments and opening suitable positions. There are hundreds of possible approaches for this! We have summarized the best methods in our article on Day trading strategy für Sie zusammengefasst.
Due to the high risks involved, we recommend that day trading with shares should initially be carried out on a Paper Trading Account to try it out. Such a demo account gives you access to all assets and functions - including professional trading software!
However, you are using play money here and are not putting your capital at risk. Only when you achieve success here over a longer period of time should you make a "real" investment. Open an account.
Which shares are suitable for day trading?
In addition to the right Strategy the selection of suitable securities is the be-all and end-all for successful day trading. Not all securities are suitable and the wrong choice can quickly lead to failure!
Due to the short holding period Fundamental analysisThe following characteristics are less important for day trading stocks. Instead, the following characteristics are important for day trading stocks:
1. volatility
Volatility, i.e. the range of price fluctuations, is an important factor in day trading with shares:
- If it is too low, the price of the security will not move far enough to generate worthwhile profits in a short period of time.
- The greater the fluctuations in a share, the greater the profits and losses we can make when trading.
- Traders who day trade shares are literally attracted to such stocks.
- In contrast, securities with a low fluctuation margin are usually preferred for long-term investment strategies.
Typical stocks with low volatility can be found in the consumer staples sector, for example. They are considered to be particularly crisis-proof (people eat, drink, etc. even in bad times) and generally record rather small price changes. These stocks are hardly suitable for day trading!
In contrast, some technology stocks and pharmaceutical companies exhibit huge price fluctuations. If such companies have sufficient size and trading volume, they are ideal for day trading!
Technology stocks and pharmaceutical companies include shares with extremely high volatility.
The combination of volatile shares and the use of leveraged products creates very risky investments that can lead to high profits. Whether trading is worthwhile despite these risks depends on the individual person and the circumstances, such as the Day trading starting capital, from.
2. volume
For every trade on an exchange, there must be a buyer and a seller. The two parties then trade the agreed number of shares (or other assets). The trading volume, i.e. how many securities changed hands, is an important indicator in day trading with shares.
- It is used, for example, to analyze price movements and their significance.
- The traded assets, i.e. the number of shares, are recorded under volume, but not the number of trades!
- It is therefore irrelevant for the volume whether many transactions with a few shares or just one single transaction with a huge number of securities were processed.
Attention!
A high volume does not stand for a high number of trades; instead, only the quantity of shares traded is indicated here!
When day trading shares, a high volume is helpful in several ways:
- Low spread: As a rule, a higher volume leads to a narrower spread, which in turn has a positive effect on the day trading return.
- Connection with higher number of transactions: In practice, a high volume is almost always associated with a high number of transactions and therefore high liquidity.
Especially with securities of very small companies or when the trading volume on an exchange is very low, it can take some time for the planned trade to be executed. This is problematic for day traders, as this investment strategy is time-sensitive - every second lost can cost money!
3. liquidity
The availability of a security is referred to as liquidity. The more buyers and sellers are active on a market and the greater the number of shares available, the more liquid it is.
- We can determine the level of liquidity using key figures such as absolute order book turnover, price determinations and the order book.
- When day trading shares, a high liquidity of the respective securities is generally preferred.
- It generally leads to narrower spreads and therefore better results.
- It also ensures that we can open and close trading positions more easily and at better prices.
Liquidity, together with volume, also offers analytical possibilities. We can use both values to detect market changes, sentiment, interest, etc. and derive our own approach from this.
4. media attention
Companies that enjoy a high profile and media presence are particularly suitable for day trading in shares. When they publish new business figures, launch products or are involved in scandals, there are usually changes in share prices.
- Active day traders are therefore well advised to follow the latest news on the respective companies. Here you can find important signals for buy or sell decisions.
- For effective monitoring, the concept of the Social trading on. Also AI Trading can help to keep an eye on current developments.
You can search for the latest news manually via relevant financial and business portals or by looking at Google Trends. It is also advisable to keep an eye on important dates, such as the publication of profits or annual reports.
Day trading shares: successful trading can be achieved with these stocks
Beginners in day trading are often on the lookout for the best insider tips: Stocks that no other trader uses and with which they can achieve great success. Unfortunately, the reality is different: Successful traders are those who rely on proven stocks and consistently pursue their strategy.
The list of the most popular and best day trading stocks is therefore quite unspectacular. All of the companies are very well-known trading securities that stand out above all due to their high trading volume and volatility:
1. tesla
The car manufacturer is regularly plagued by scandals - mostly directly related to CEO Elon Musk, who bought the company almost 20 years ago. With a daily trading volume of over 110 million US dollars and very high volatility, Tesla shares are ideal for day trading.
2. nvidia
Chip manufacturer Nvidia has experienced two extreme hype phases, first with cryptocurrencies and then with artificial intelligence. However, this was also accompanied by repeated dramatic price slumps - ideal conditions for day trading!
3. meta
Facebook parent company Meta is also highly volatile. Combined with the very high trading volume and strong liquidity, this creates another classic day trading stock.
The other popular day trading stocks also almost exclusively include major technology companies. These include Amazon, Apple and Microsoft, for example. They all offer very high liquidity and trading volumes. Volatility is also very good, but differs slightly from company to company.
Which stock is best suited to day trading depends largely on your strategy. Courses, seminars, books, financial portals, etc. often recommend securities that fit the respective trading strategy.
Risk and opportunities: important figures on day trading
Interest in day trading has increased significantly in recent years. This is partly due to the increased attention that the financial market in general is receiving through social media, financial apps, coaching, etc.
- Securities undoubtedly have the highest level of awareness among laymen and are therefore a popular entry point.
- The chances of winning big are always publicized in the media.
- The considerable risks that lead to huge losses for many budding day traders, on the other hand, receive less attention.
We have compiled some important facts about day trading below to help you decide for or against day trading:
- Around 40 percent of all day traders give up after less than a month. Only 13 percent stay on the ball even after three years.
- According to a broker, a single day trader has set a world record with a profit of more than 30 million US dollars in a single day.
- Only 9.5 percent of all day traders are female.
- Over a period of six months, only 13 percent of day traders made continuous profits without setbacks (on a daily basis). Over a period of five years, this figure was only one percent.
- The average investor achieves an annual return that is on average 1.5 percent BELOW a simple market index. Particularly active traders even perform 6.5 percent worse.
- In 2020, 72 percent of day traders in the USA recorded a loss.
- In the same period, the average annual profit of successful day traders was USD 13,000.
- Time spent: 45 percent of day traders say they spend one to two hours a day on the activity. 13 percent spend more than six hours a day on day trading!
- 88 percent of day traders use stop-loss orders to limit their losses.
The figures come from various studies, surveys and publications by financial supervisory authorities and stock exchanges. They were mainly collected in the USA, UK and Taiwan. (1 - 6)
Decision support: Is day trading with shares suitable for me?
Due to the high risks involved in day trading, it cannot be emphasized often enough that this form of investment is not suitable for everyone! The majority of day traders lose money with this approach!
However, if you are thinking of taking up day trading with shares, the following decision-making aid may help you to form an opinion.
Day trading with shares is suitable for you if you:
- Work in a disciplined and structured way and be able to leave your emotions completely out of it.
- Very extensive prior knowledge or a lot of patience to build up this knowledge.
- Have already gained extensive experience in other market areas and forms of investment.
- Bring sufficient time and start-up capital.
- Are financially and mentally able to deal with high risks and also bear losses.
Day trading is NOT suitable for you if you:
- Are unable to bear risks and are personally or financially unable to accept losses.
- you are prone to emotional decisions and short-sighted reactions.
- Are not interested in the financial markets themselves, but simply want to make a quick buck.
- you want to achieve passive returns, for example through price growth, without doing anything yourself. Day trading with shares only generates profits if you actively work on your strategy.
If you do not have the right personality, do not have sufficient Day trading starting capital or cannot trade for other reasons, it is not the end of the world!
There are numerous alternatives available that offer comparable returns and in most cases are significantly less risky! For example, the AI Trading or the classic buy-and-hold investment via Shares savings plan exciting possibilities.
The average investor achieves a higher annual return than a typical day trader.
If you are interested in complex financial transactions with a wide variety of strategies, you might also be interested in Trade options. High profits are also possible here; however, there is no time pressure as with day trading.
Conclusion: Volatile day trading shares are lucrative, but also risky
In day trading with shares, securities are used to generate profits within one trading day. The often rather small price changes are amplified many times over by leveraged products, so that very high earnings can actually be generated if successful.
However, losses are much more common: the majority of day traders lose money with this form of investment. The fact that day trading with shares is easier to understand than other financial products does nothing to change this.
Corporate securities also have the advantage that an incredible variety is available. This makes them popular vehicles for intraday trading and they have their own advantages and disadvantages compared to alternatives such as forex or commodities.
If you want to enter this field despite all the risks, there are a few things to bear in mind. Volatile shares for day trading generally offer the highest opportunities and risks and are therefore popular assets. The most popular stocks include large companies with strong price fluctuations such as Tesla, Nvidia, Meta, Amazon, Apple, Microsoft and others.
One thing is clear: it doesn't work without a strategy! If you open positions haphazardly, you may make a few small profits in the short term, but in the long term this approach will lead to heavy losses! One of the many Day trading strategies must form the basis of your actions if you want to achieve positive results in the long term.
With sufficient specialist knowledge and a structured and unemotional approach, there is the prospect of attractive profits. However, due to the risks involved, we strongly recommend that you start with a Demo account and try out this form of trading in a safe environment!
If active trading seems too risky for you, there are numerous alternatives available. Even a simple Equity portfoliowhich, for example, is based on Growth Aktien or Value Aktien can generate comparable returns and is generally less dangerous. Also Trade options is an exciting opportunity to implement complex financial strategies!
Sources for the statistics:
- Zippia: "Day trader demographics and statistics in the US"
- WorldFinance: "The changing face of trading"
- MyTradingSkills: "15 Mind Opening Day Trading Statistics"
- DayTradeReview: "Day Trading Statistics-10 Interesting Facts"
- Tradeciety: "Scientists discovered why most traders lose money - 24 surprising statistics", University of California: "Do Individual Day Traders Make Money? Evidence from Taiwan", NYSE: "Trading and Data"
- FINRA: "Day Trading Risk Disclosure Statement"
