Complete Day Trading Cheat Sheet – Strategies, Tools & Risk Management Guide

Introduction

Day trading is the practice of buying and selling financial securities within the same trading day, capitalizing on short-term price movements. Day traders close all positions before market close to avoid overnight risk and leverage technical analysis, market patterns, and volatility to generate profits from intraday price fluctuations.

Why Day Trading Matters:

• Income potential from short-term market movements
• Capital efficiency through leverage and quick turnover
• Market independence – profit in both rising and falling markets
• Skill development in technical analysis and risk management
• Flexibility to trade from anywhere with internet access

Important Disclaimer: Day trading involves substantial risk and is not suitable for all investors. Most day traders lose money. Only trade with capital you can afford to lose.

Core Concepts & Terminology

Essential Trading Terms

Market Structure Basics

Market Hours (EST):

• Pre-market: 4:00 AM – 9:30 AM
• Regular hours: 9:30 AM – 4:00 PM
• After-hours: 4:00 PM – 8:00 PM

Key Market Participants:

• Retail traders
• Institutional investors
• Market makers
• High-frequency traders
• Algorithmic trading systems

Essential Setup Requirements

Account Requirements

Essential Tools & Software

Trading Platform Requirements:

• Real-time Level 2 market data
• Advanced charting capabilities
• Hot keys for quick order entry
• Multiple monitor support
• Reliable internet connection (backup recommended)

Recommended Hardware:

• High-performance computer
• Multiple monitors (minimum 2)
• Backup internet connection
• Uninterruptible power supply (UPS)

Broker Selection Criteria

Trading Strategies & Patterns

Momentum Trading

Concept: Trade in direction of strong price movement

Setup Requirements:

• High relative volume (2x+ average)
• Clear price direction
• Breaking key levels
• News catalyst (optional)

Entry Signals:

• Breakout above resistance with volume
• Pullback to moving average in trending stock
• Gap up/down with follow-through

Scalping Strategy

Concept: Profit from small price movements with high frequency

Key Requirements:

• Tight bid/ask spreads
• High liquidity stocks
• Fast execution platform
• Strict risk management

Reversal Trading

Concept: Identify exhaustion points and trade against the trend

Classic Patterns:

• Double top/bottom
• Head and shoulders
• Hammer/shooting star candlesticks
• RSI divergence

Risk Management:

• Smaller position sizes
• Tight stop losses
• Quick profit taking

Gap Trading Strategies

Technical Analysis Essentials

Key Indicators

Trend Indicators:

• Moving Averages (9, 20, 50, 200 EMA)

  • Price above = bullish bias
  • Price below = bearish bias
  • Crossovers signal trend changes

• VWAP (Volume Weighted Average Price)

  • Intraday reference point
  • Institutional benchmark
  • Support/resistance level

Momentum Indicators:

• RSI (14 period)

  • Above 70 = overbought
  • Below 30 = oversold
  • Divergence signals reversal

• MACD

  • Signal line crossovers
  • Histogram changes
  • Zero line crosses

Volume Indicators:

• Relative Volume
  • 2x+ average = significant
  • Confirms price moves
  • Early warning system

Chart Patterns

Continuation Patterns:

• Bull/bear flags
• Pennants
• Triangles
• Rectangle consolidation

Reversal Patterns:

• Double tops/bottoms
• Head and shoulders
• Wedges
• Diamond formations

Candlestick Patterns

Risk Management Framework

Position Sizing Rules

2% Rule: Never risk more than 2% of account on single trade

Calculation Formula:

Position Size = (Account Size × Risk %) ÷ (Entry Price - Stop Loss)

Example:
$50,000 account × 2% = $1,000 risk
Stock at $100, stop at $98 = $2 risk per share
Position Size = $1,000 ÷ $2 = 500 shares

Stop Loss Strategies

Money Management Rules

Daily Loss Limits:

• Maximum daily loss: 6% of account
• Maximum consecutive losses: 3 trades
• Take break after hitting limits

Profit Taking:

• Take partial profits at 2:1 risk/reward
• Trail stops on remaining position
• Never turn winner into loser

Account Protection:

• Keep 80% in cash
• Maximum 3-5 positions simultaneously
• Reduce size after losing streaks

Market Scanning & Stock Selection

Daily Watchlist Criteria

Pre-Market Scanners:

• Gappers (up/down 3%+)
• High relative volume (2x+)
• Price range: $5-$500
• Average volume: 1M+ shares

Intraday Scanners:

• New highs/lows
• Volume spikes
• Price alerts
• News-driven moves

Stock Categories to Focus On

News Catalyst Trading

High-Impact Events:

• Earnings announcements
• FDA approvals (biotech)
• Analyst upgrades/downgrades
• Merger announcements
• Economic data releases

Trading Approach:

• Pre-position before news
• Trade the initial reaction
• Avoid holding through uncertainty
• Use smaller position sizes

Common Challenges & Solutions

Psychological Challenges

Technical Challenges

Execution Issues:

• Slippage on market orders
• Partial fills on limit orders
• Platform freezes during volatility

Solutions:

• Use limit orders when possible
• Have backup broker/platform
• Test all hotkeys and functions

Market Condition Adaptation:

• Low volatility periods
• Trending vs. choppy markets
• High correlation among stocks

Solutions:

• Adjust strategies to conditions
• Reduce size in difficult conditions
• Consider taking breaks

Daily Trading Routine

Pre-Market Preparation (8:00-9:30 AM)

Market Analysis:

1. Review overnight news and futures
2. Check economic calendar
3. Identify support/resistance levels
4. Scan for gappers and volume leaders
5. Create watchlist (10-15 stocks)

Risk Management Setup:

• Set daily loss limit
• Plan position sizes
• Review previous day’s trades
• Set profit targets

Market Open Strategy (9:30-10:30 AM)

First Hour Focus:

• Highest volume and volatility
• Gap fills and breakouts
• Avoid first 15-minute chop
• Focus on established patterns

Key Levels to Watch:

• Previous day’s high/low
• Pre-market high/low
• VWAP
• Round numbers

Mid-Day Approach (10:30 AM-2:00 PM)

Slower Period Strategies:

• Range-bound trading
• Mean reversion plays
• Smaller position sizes
• Reduced frequency

Power Hour (3:00-4:00 PM)

End of Day Dynamics:

• Institutional activity increases
• Position squaring
• Momentum continuation
• Index rebalancing

Post-Market Review

Trade Analysis:

• Review all trades (winners and losers)
• Identify pattern adherence
• Calculate key metrics
• Plan improvements

Best Practices & Optimization Tips

Trading Psychology

Mindset Rules:

• Treat trading as a business
• Focus on process over profits
• Accept losses as cost of business
• Maintain emotional detachment

Performance Tracking:

• Win rate percentage
• Average win vs. average loss
• Maximum drawdown
• Risk-adjusted returns

Continuous Improvement

Common Mistakes to Avoid

Trading Mistakes:

• Trading without a plan
• Risking too much per trade
• Averaging down on losers
• Holding overnight (unless planned)
• Trading illiquid stocks

Behavioral Mistakes:

• Emotional decision making
• Overtrading
• Ignoring risk management
• Following tips from others
• Not taking breaks

Advanced Strategies

Options Day Trading

Strategies:

• Long calls/puts on directional moves
• Credit spreads in range-bound markets
• Butterfly spreads for earnings
• Iron condors for low volatility

Risk Considerations:

• Time decay (theta)
• Implied volatility changes
• Liquidity constraints
• Assignment risk

Forex Day Trading

Major Pairs:

• EUR/USD (most liquid)
• GBP/USD (high volatility)
• USD/JPY (trending)
• USD/CHF (safe haven)

Trading Sessions:

• London: 3:00-12:00 EST
• New York: 8:00-17:00 EST
• Tokyo: 19:00-4:00 EST

Cryptocurrency Day Trading

Characteristics:

• 24/7 market
• High volatility
• News-driven moves
• Regulatory risks

Popular Pairs:

• BTC/USD
• ETH/USD
• Major altcoins

Performance Metrics & Analysis

Key Performance Indicators

Trade Journal Template

Required Fields:

• Date and time
• Symbol and setup
• Entry and exit prices
• Position size
• Risk and reward
• Outcome and lessons

Weekly Review Questions:

• What worked well?
• What needs improvement?
• Are you following your rules?
• What patterns do you see?

Tax Considerations

Trading Status Classification

Record Keeping Requirements

Essential Records:

• All trade confirmations
• Account statements
• Expense receipts
• Trading journal
• Computer and software costs

Deductible Expenses:

• Trading platform fees
• Market data subscriptions
• Computer equipment
• Home office (if qualified)
• Education and research

Tools & Resources

Essential Software

Charting Platforms:

• TradingView (web-based)
• ThinkorSwim (TD Ameritrade)
• Interactive Brokers TWS
• MetaTrader 4/5 (Forex)

News Sources:

• Bloomberg Terminal
• Reuters
• MarketWatch
• Benzinga Pro
• Twitter financial accounts

Educational Resources

Books:

• “Technical Analysis of the Financial Markets” – John Murphy
• “Market Wizards” – Jack Schwager
• “Trading in the Zone” – Mark Douglas
• “How to Day Trade for a Living” – Andrew Aziz

Online Communities:

• Reddit r/Daytrading
• Discord trading servers
• TradingView chat rooms
• YouTube educational channels

Professional Development

Courses & Certifications:

• Chartered Market Technician (CMT)
• Financial Risk Manager (FRM)
• Online trading academies
• Mentorship programs

Quick Reference Checklist

Pre-Trade Checklist

• [ ] Market conditions assessed
• [ ] Watchlist prepared
• [ ] Risk parameters set
• [ ] Platform functioning properly
• [ ] News and catalysts identified

Trade Execution Checklist

• [ ] Setup criteria met
• [ ] Position size calculated
• [ ] Stop loss set
• [ ] Profit target identified
• [ ] Exit strategy planned

Post-Trade Checklist

• [ ] Trade logged in journal
• [ ] Performance metrics calculated
• [ ] Lessons learned documented
• [ ] Risk management reviewed
• [ ] Next day preparation started

Emergency Procedures

• [ ] Backup internet connection ready
• [ ] Alternative trading platform available
• [ ] Phone number for broker
• [ ] All positions can be closed quickly
• [ ] Stop losses properly set

Risk Warnings & Disclaimers

Important Risk Disclosures:

• High Risk Activity: Day trading involves substantial risk of loss and is not suitable for all investors
• Regulatory Requirements: Pattern day traders must maintain $25,000 minimum equity
• Tax Implications: Trading profits are subject to taxes; consult a tax professional
• Emotional Stress: Day trading can be psychologically demanding
• Time Commitment: Successful day trading requires significant time and dedication

Success Statistics:

• Studies show 80-90% of day traders lose money
• Only 1-5% consistently profitable
• Most profitable traders have years of experience
• Starting capital and education are crucial factors

Recommendation: Start with paper trading and education before risking real capital. Consider working with a mentor or taking formal training courses.