Want to jump straight to the best? Most of our users prefer Interactive Brokers for stock trading.

Online trading technology is so advanced that you can do just about anything from the comfort of your own home. Day trading is one of the most common trading approaches, and if you want to start, Benzinga is here to show you how.Not only this, but we’ll also cover the six most important rules you’ll need to know to give you a leg up on your day-to-day adventures with the stock market.

Overview: Day Trading Rules

Day trading is a high-risk trading style in which you purchase and sell financial securities on the same day. Unlike standard investors who buy and own financial assets for lengthy periods, day traders speculate on the price of financial assets without actually owning them. Since trades are open and closed intraday, they aim for small price moves.

These moves will not make much of a change to your bankroll if you trade with your own funds, so day traders rely on borrowed money (trading on margin) to conduct trades. Though highly speculative, margin trading allows traders who don’t have the obligatory cash on hand to day trade.

Rule 1: You’ll Need to Abide by the Pattern Day Trader Rule

You’re considered a pattern day trader by the Financial Industry Regulatory Authority (FINRA) if you execute four or more trades in a five-day period. Pattern day traders must have 6% of these trades in the same margin account for that same five-day period.

Certain day trading brokers might have different requirements to qualify you as a pattern day trader. Contact your agency to determine the exact rules for pattern day trading before opening an account.

Example: You participate in a broker’s day trading courses for pattern day trading and the broker can give you an account to complete your training. Pattern day traders must maintain a minimum account equity of $25,000 and are always bound by margin.

Rule 2: Day Trading Accounts Operate on Margin

Margin means you not only leverage your own funds but with extra funds that you borrow from your broker.

These funds offer you greater buying power, and you can aim for more significant returns. However, the inherent risk involved in margin trading means that one bad trade can result in a severe loss of your own funds. For example:

  • You have a $225,000 account for live day trading
  • You trade on margin with a leverage of 4:1
  • You can trade with only $200,000 in order to comply with equity requirements
  • 4 x $200,000 = $800,000 total buying power
  • Your strategy puts 20% of your buying power in a single trade = $160,000 per trade

If the price of your financial asset goes against you with 5%, you will lose real money equal to:

  • $160,000 * 0.05 = $8,000
  • This is an $8,000 loss from a single trade. So, what is the maximum negative move you can handle?
  • $160,000 * X = $200,000
  • X = 200,000 / 160,000 = 1.25 or 125%
  • Since financial assets cannot lose more than 100% of their value, you cannot lose all your funds with this strategy. However, you can still lose the investment in the trade, which is 80% of the $200,000.

If you are not able to meet your broker’s requirements financially, you will get a margin call. Your broker will alert you to provide more funds, or your trades will be instantly closed on a loss.

It’s important to follow strict money management rules to avoid such a scenario. You can always limit your risk with a stop-loss order. If you limit your losses to 1% per trade, it’ll take 100 losing trades to fully wipe out your account. Let’s do some math again.

  • You have $200,000 available for trading. One percent risk per trade is $200,000 * 0.01 = $2,000
  • You want to limit your loss to a maximum of $2,000 per trade. Thus, we need to calculate how much $2,000 is from the amount you invest in a single trade ($160,000)
  • 2,000 / 160,000 = 0.0125, or 1.25%
  • With the above conditions, your stop-loss order should be at a distance of 1.25%. If a stock trades at $250 per share, your stop-loss should be at a distance of $250 * 0.0125 = $3.13

Rule 3: Day Traders are Subject to Specific Requirements

According to FINRA, a day trader will be subject to the following requirements:

Equity

Your equity is your absolute account value, including any profit or loss from open trade. A day trader needs to make a minimum deposit of $25,000 and maintain a minimum equity of $25,000 all the time.

The minimum equity can contain both cash and securities. Note that your broker can always impose higher equity requirements.

Margin Requirements

You can trade up to four times more on the maintenance margin excess. Your brokerage firm can apply changes to this rule.

Buying Power

Your buying power is the maintenance margin excess times the margin you are using. If your excess is $50,000, then your buying power will equal $50,000 * 4 = $200,000.

Margin Call

You get a margin call when you are unable to meet your account requirements. This could be fatal for your account as your trades can get closed on loss if you don’t comply. You will get a margin call if you exceed your buying power limitation. Then you will have up to five business days to deposit funds to meet the requirement.

Rule 4: Don’t Trade with Money You Cannot Afford to Lose

Avoid putting your savings or your child’s college fund into day trading activity. Your funds should be explicitly assigned for trading.

Rule 5: Be Familiar with the Risks

Three different risks related to trading:

You Can Lose Everything on a Single Trade

Successful day traders have many losing trades in addition to winning trades. Therefore, every trade needs to have a stop-loss order or security to limit your potential loss for every trade.

You need to know how much you will lose and what you will have in case the market runs against you.

Bankruptcy Risk

If you’re a day trader, bankruptcy is a non-remote possibility, which will cost you all the money in your trading account and could saddle you with extra debt. Make sure you stay familiar with the trading conditions of your broker and the eventual outcomes in case you fail.

Broker Financial Failure Risk

What happens if your trading provider fails to meet its financial obligations and goes out of business? Some reputable companies guarantee you a certain amount of money in case they go out of business.

Rule 6: Aim for Steady Growth

Many beginner traders believe they will profit big-time right away, maybe popularized by the Hollywood movies we watch every day. But, in reality, most traders are out of business not long after they begin day trading.

Your goal is to grow on a consistent basis, and a successful amount could even be 2% per month.

Example: Imagine you have a $100,000 account and you grow it by 2% every month. At the end of the year, you would have $124,337. (Most investments will not return a 24.34% yearly interest.)

Best Online Brokers for Day Trading

get started securely through Webull’s website
Best For
Intermediate Traders and Investors
N/A
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks
get started securely through SoFi’s website
Best For
IPO Investing
N/A
1 Minute Review

SoFi’s mission is simple: to help reach clients like you reach their financial independence and realize their ambitions. SoFi knows that this independence comes from making decisions that help your money start to work for you in the long run. The brand helps individuals make these decisions through personal financial products such as personal loans, student loans and automated and active investing

The brand additionally provides in-person experiences such as educational and networking events, personalized guidance from experienced financial planners and one-on-one advising with professional career coaches. SoFi’s services have been highlighted in outlets such as Forbes, Medium, and CNBC’s Make It.

Best For
  • IPO Investing
  • Mobile Investing
Pros
  • U.S.-based customer service
  • Highly-rated mobile app for iPhone and Android
Cons
  • Only available in the U.S.
get started securely through Moomoo’s website
Best For
Active Traders
N/A
1 Minute Review

Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.

Get started right away by downloading Moomoo to your phone, tablet or another mobile device.

Best For
  • Cost-conscious traders
  • Active and Advanced traders
Pros
  • Over 8,000 different stocks that can be sold short
  • Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
  • No minimum deposit to open an account.
Cons
  • No chat support
Get started securely through Axos Invest’s website
Best For
Sign Up Bonus
N/A
1 Minute Review

It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there’s a great need for easy, straightforward investment management that doesn’t cost an arm and a leg in fees or to get started. If you’re new to investing or an old hat who wants to make the switch to a virtual manager, deciding which features you need can be confusing if not overwhelming.

If you want a no-frills financial management platform, Axos Invest (formerly WiseBanyan) takes a traditional but sophisticated approach to automated online investing.

Best For
  • Traditional investors trying out an automated investor for the first time
  • New investors that want to take a hands-off approach to portfolio management
Pros
  • Straightforward automated investing
  • Relatively low account minimum and automated investing fee
  • A solid roster of available investment account types
Cons
  • Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
  • No direct relationship with a human financial advisor
get started securely through Interactive Broker’s website
Best For
GlobalAnalyst Product
N/A
1 Minute Review

This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.

Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.

Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.

Best For
  • Price earnings growth valuations
Pros
  • Easily evaluate investment opportunities
Cons
get started securely through eToro’s website
Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Best For
Copy Trading
N/A
1 Minute Review

eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.

eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources. 

Best For
  • Traders looking for an easy-to-use platform
  • Traders who want to practice their trades using a virtual account before entering the market
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • High non-trading fees

Best Stocks of the Day

Want Real Time Gainers? Start a free 14 day trial

Gainers

Session: May 19, 2022 4:00 pm – May 20, 2022 11:08 am
Symbol Open Close Change Change % Volume
Buy LEJU Stock – On Webull LEJU
Leju Hldgs
0.32 3.98 3.66 1158.69% 60.41K
Buy BEST Stock – On Webull BEST
BEST
0.28 1.19 0.91 324.03% 2.16M
Buy BRW Stock – On Webull BRW
Saba Capital Income
4.10 8.19 4.09 99.75% 44.88K
Buy IMMX Stock – On Webull IMMX
Immix Biopharma
1.63 2.51 0.88 53.68% 69.99M
Buy AEMD Stock – On Webull AEMD
Aethlon Medical
1.11 1.46 0.35 31.53% 1.24M
Buy ALLR Stock – On Webull ALLR
Allarity Therapeutics
1.64 2.11 0.47 28.65% 13.63K
Buy GLUr Stock – On Webull GLUr
The Gabelli Global Utility and Income Trust Rights (expiring June 23, 2022) Rights
0.03 0.03 0.01 28.39% 40.31K
Buy GOVX Stock – On Webull GOVX
Geovax Labs
0.73 0.93 0.20 27.25% 5.19M
Buy TXMD Stock – On Webull TXMD
TherapeuticsMD
2.27 2.83 0.56 24.44% 14.75M
Buy SIGA Stock – On Webull SIGA
SIGA Technologies
8.65 10.76 2.11 24.39% 22.87M
Buy GET Stock – On Webull GET
Getnet Adquirencia
1.47 1.80 0.33 22.51% 93.02K
Buy TOMZ Stock – On Webull TOMZ
TOMI Environmental Solns
0.73 0.87 0.14 19.65% 23.30K
Buy AGE Stock – On Webull AGE
AgeX Therapeutics
0.73 0.86 0.14 18.96% 38.48K
Buy CLPT Stock – On Webull CLPT
ClearPoint Neuro
8.61 10.06 1.45 16.84% 20.48K
Buy PCSA Stock – On Webull PCSA
Processa Pharma
2.25 2.60 0.35 15.55% 14.76K
Buy CING Stock – On Webull CING
Cingulate
1.22 1.40 0.18 14.75% 0.22K
Buy IMAC Stock – On Webull IMAC
IMAC Holdings
1.04 1.19 0.15 14.68% 5.65M
Buy LCAPU Stock – On Webull LCAPU
Lionheart Acquisition
10.68 12.21 1.53 14.32% 0.49K
Buy MDXH Stock – On Webull MDXH
MDxHealth
7.60 8.69 1.09 14.26% 2.60M
Buy RDBX Stock – On Webull RDBX
Redbox Entertainment
3.80 4.33 0.53 13.94% 5.54M

Losers

Session: May 19, 2022 4:00 pm – May 20, 2022 11:08 am
Symbol Open Close Change Change % Volume
Buy RESI Stock – On Webull RESI
Front Yard Residential
6003.61 12.32 -5991.29 -99.80% 0.40K
Buy XDNA Stock – On Webull XDNA
Strategic CRISPR & Gene Editing Technology ETF
2801.99 9.77 -2792.22 -99.66% 0.17K
Buy ATHX Stock – On Webull ATHX
Athersys
0.76 0.28 -0.47 -62.72% 28.38M
Buy EVFM Stock – On Webull EVFM
Evofem Biosciences
1.10 0.42 -0.68 -61.73% 12.52M
Buy TIGO Stock – On Webull TIGO
Millicom Intl Cellular
22.20 16.93 -5.27 -23.73% 22.14K
Buy VEDU Stock – On Webull VEDU
Visionary Education Tech
3.05 2.37 -0.68 -22.28% 1.32M
Buy ROST Stock – On Webull ROST
Ross Stores
92.70 72.13 -20.58 -22.20% 19.07M
Buy FHTX Stock – On Webull FHTX
Foghorn Therapeutics
11.45 8.91 -2.54 -22.19% 26.97K
Buy BGXX Stock – On Webull BGXX
Bright Green
15.70 12.32 -3.38 -21.53% 1.54M
Buy NURO Stock – On Webull NURO
NeuroMetrix
5.50 4.58 -0.92 -16.73% 6.55M
Buy UPST Stock – On Webull UPST
Upstart Hldgs
51.58 43.60 -7.98 -15.48% 9.72M
Buy SQL Stock – On Webull SQL
SeqLL
0.80 0.68 -0.12 -15.34% 22.76K
Buy LSF Stock – On Webull LSF
Laird Superfood
3.25 2.76 -0.49 -15.08% 47.81K
Buy CELZ Stock – On Webull CELZ
Creative Medical Tech
1.53 1.30 -0.23 -15.04% 32.28K
Buy BURL Stock – On Webull BURL
Burlington Stores
177.20 151.15 -26.05 -14.71% 1.96M
Buy MHUA Stock – On Webull MHUA
Meihua International
6.89 5.91 -0.98 -14.17% 0.43K
Buy MGTA Stock – On Webull MGTA
Magenta Therapeutics
1.46 1.26 -0.20 -13.70% 31.24K
Buy ACRX Stock – On Webull ACRX
AcelRx Pharmaceuticals
0.29 0.25 -0.04 -13.49% 94.94K
Buy ENDP Stock – On Webull ENDP
Endo International
0.58 0.50 -0.08 -13.46% 5.54M
Buy JP Stock – On Webull JP
Jupai Hldgs
0.52 0.45 -0.07 -13.39% 44.94K

Final Thoughts

More than 80% of day traders aren’t successful, and it’s easy to see why. Clearly, day trading comes with a harrowing set of rules and requirements, but meeting these requirements is not enough to be a successful day trader.

You’ll first need to build a working trading strategy and then apply proper money management rules. Take into consideration minimum equity requirements, margin, buying power and the amount you use in one trade.

Want to learn more? Check out Benzinga’s guides to the best day trading brokers, best day trading software and best day trading books. Also, if you’re just getting into day trading, learn how to day trade with only $100.