What is day trading & how does it work?

Day trading is essentially a play on the short-term volatility (or price movement) of a stock on any given day. Day traders buy a stock at one point during the day and then sell out of the position before the market closes. If the stock's price rises during the time the day trader owns it, the trader can realize a short-term capital gain.

Are penny stocks the same as day trading?

No, they aren't. "Penny stocks" and "day trading" are two entirely separate terms, but they are often found together in various contexts. Penny stocks are simply stocks that trade for less than $5. Day trading is the act of buying and selling a stock in the same trading day or within a similarly short time period.

What happens if a day trader buys a stock?

If the stock's price rises during the time the day trader owns it, the trader can realize a short-term capital gain. If the price declines, then the day trader accrues a short-term capital loss. The Chicago Board Options Exchange Volatility Index, or VIX, is an index that gauges the volatility investors expect in the stock market.

How do I day trade stocks?

To make work easier, try to find liquid stocks with decent trading volume and avoid penny stocks. Look to specific industry sectors where you can learn the sector's particular nuances and what metrics are best utilized to trade those companies. There is no one specific way or a one-size-fits-all way to day trade.