What Day Traders Do
Day traders typically target stocks, options, futures, commodities, or currencies (including crypto), holding positions for hours, minutes, or even seconds before selling again. Day traders enter and exit positions within the day, hence the term day traders. They rarely hold positions overnight. The goal is to profit from short-term price movements. Day traders can also use leverage to amplify returns, which can also amplify losses.
Setting stop-loss orders and profit-taking points—and not taking on too much risk—is vital to surviving as a day trader. Professional traders often recommend risking no more than 1% of your portfolio on a single trade. If a portfolio is worth $50,000, the most at risk per trade is $500. The key to managing risk is to not allow one or two bad trades to wipe you out. If you stick to a 1% risk strategy and set strict stop-loss orders and profit-taking points, you can limit your losses to 1% and take your gains at 1.5%, but it takes discipline.