Day Trading Noob

Just open an E*Trade account and transfer $5000 from your checking account. You can then transfer about $3000 back to your checking account a few days later.

open and fund a brokerage account. now you have started. what you do after that is not anything that has a set of instructions.

you can buy and sell stock, ETFs, and/or options. you can buy at any time and sell at at any time that the markets are open.

"day trading" is either buying or selling the open and buying or selling the close. you don't hold positions open longer than one trading day. all your gains and losses will be short term.

read this

LINK

quote:

---

For you gurus, any suggestions on how to start?

---

Go to the casino and buy some chips.

Learn the meaning of wash sale

Go to the casino at least you have a chance of winning

Most people go through that phase. It’s not smart investing…

It’s a good starting point (at least it was for me). I do encourage day trading for new investors so they can learn the tough lessons with relatively small piles.

Had I made the mistakes today that I made back then, I’d be out 100s of thousands instead of 10s.

I will never put my hard earned money at that level of risk again.

Good luck

For day trading "with a humble few thousand," you may be better off instead swing trading. The reason for this is that you need a definite, known edge or else you've no idea if what you're doing has a long-term positive expectancy (that is, it works). To have a definite, known edge, you'll need to backtest, and intraday data to do so can quickly get expensive (it can potentially be expensive for daily data, for that matter), so that can end up eating a big chunk of your few thousand before you begin or require you to put more up.

You'll need to decide what you'll be trading, what rule(s) will affect your chosen security/ies, and obtain at least a basic understanding of said secruity/ies and their market(s). For example, the wash sale rule, which LChama rightly brought up, applies to stocks but not to Section 1256 securities.

As you're trying to decide what security/ies to trade, remember that you'll need historical data for backtests that is not too expensive while also being fairly accurate. Databento is typically inexpensive and high quality, but only goes back so far (May 2018 for equities) and doesn't have forex data. They give $125 in free credits (good for 6 months) to new accounts that you can use on the usage based option. Equity data per symbol can be as low as 1 cent (1D data). For the intraday data, you'll want to select the zstd compressed option during your request, at least if you use CSV format. If you decide to swing trade equities, you may be able to just scrape the 1 day, 1 week, and/or 1 month data from Yahoo Finance or investing.com, though you'll want to make sure the dates are accurate (I've found them off by a day in the past). I've no idea where to get forex or crypto data; investing.com has forex data IIRC, but I couldn't confirm its accuracy.

As for tools to do the backtests, I do mine in Excel. Some trading platforms, websites, and/or programs are available to do the backtesting and may come with data already. However, these may require coding abilities and/or payment to use. An LLM can write code for you, but you will always want to make sure the code works as you want it to. Remember, this is your money on the line.

As for ideas to backtest, the possibilities are endless. You can try common technical indicators and setups (prepare to be disappointed most of the time). You can browse SSRN's eLibrary under the economics research, financial & investment planning research, and financial economics sections under social sciences for ideas others have written papers on. I'll mention that, after a trading method or edge has been used for 10 or 15 years in the industry, someone will often write a paper on it, though that does not apply to most papers, and it doesn't mean that you'll have the resources to use it. You could just ask questions like "what happens after security XYZ declines by 3% or more in one day?" The trick is making sure your question can lead to a quantified result so you know what you're working with.

Once you have the results to your question, you'll need to compare them to a benchmark such as, but not limited to, the S&P 500 or whatever is relevant to your chosen security/ies. You'll want to calculate things such as win rate, trade length, mean and median returns, average and max gains and losses, profit factor, maybe payoff ratio, max drawdown, ulcer index, possibly Sharpe Ratio, and Jensen's alpha (if applicable). LLM's are often your friend here, but remember they make mistakes. Keep in mind that just because your total return is smaller than your benchmark does not necessarily mean it's a bad trade: you may be doing better in terms of time in the market and/or risk exposure, and so some leverage may boost your results to make it worthwhile. You'll need a rule or rules to stop losing trades from running too long. You'll also need to deduct from your backtested results to account for trading fees and slippage (where you get in and out vs where you are trying to). If you do find something, you can then try paper trading it and then live trading.

Or, after reading all this, you could just say F it and use the money to bet on horses for fun instead.

EDIT: I forgot you'll want to calculate your idea's and your benchmark's CAGRs for the sample period, and calculating CDGR (daily instead of annual) is great to see how well a system is doing while active. For ideas, the paper (later made a book) 151 Trading Strategies provides a number of ideas, some of which you will find either not easily testable or not significantly worthwhile. I changed 1 (not saying which) and gave the SPX backtest results to a friend for her to potentially use. With my changes, the 2x leveraged CAGR was about 14% over the past 30 years, so I know for a fact at least 1 idea with some tweaks is worthwhile. And whatever you do, DON'T OVERFIT TO YOUR DATA!!!

Good stuff thanks for the insight