There are several basic strategies by which day traders attempt to make a profit: Trend following, playing news events, range trading, and scalping. In addition to (or instead of) these, some day

traders also use Contrarian (reverse) strategies (more commonly seen in algorithmic trading) to trade specifically against irrational behavior from day traders using these approaches.

Some of these approaches require shorting stocks instead of buying them normally: the trader borrows stock from his broker and sells the borrowed stock, hoping that the price will fall and he will be able to purchase the shares at a lower price. There are several technical problems with short sales: the broker may not have shares to lend in a specific issue, some short sales can only be made if the stock price or bid has just risen (known as an "uptick"), and the broker can call for return of its shares at any time. Some of these restrictions (in particular the uptick rule) don't apply to trades of stocks that are actually shares of an exchange-traded fund (ETF).

Trend following, a strategy used in all trading time frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa. The trend follower buys an instrument which has been rising, or short-sells a falling one, in the expectation that the trend will continue.

Playing news is primarily the realm of the day trader. The basic strategy is to buy a stock which has just announced good news, or short sell on bad news. Such events provide enormous volatility in a stock and therefore the greatest chance for quick profits (or losses). Determining whether news is "good" or "bad" must be determined by the price action of the stock, because the market reaction may not match tone of the news itself. The most common cause for this is when rumors or estimates of the event (like those issued by market and industry analysts) were already circulated before the official release, and prices have already moved in anticipation. The news is said to be already "priced-in" to the stock price.

A range trader watches a stock that has been rising off a support price and falling off a resistance price. That is, every time the stock hits a high, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending. The range trader therefore buys the stock at or near the low price, and sells (and possibly short sells) at the high. A related approach to range trading is looking for moves outside of an established range, called a breakout (price moves up) or a breakdown (price moves down), and assume that once the range has been broken prices will continue in that direction for some time.

Scalping originally referred to spread trading. Scalping is a trading style where small price gaps created by the bid-ask spread are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds.

Scalping highly liquid instruments for off the floor daytraders involves taking quick profits while minimizing risk (lose exposure). It applies technical analysis concepts such as over/under bought, support & resistance zones as well as trendline, trading channel to enter the market at key points and take quick profits from small moves. The basic idea of scalping is to exploit the inefficiency of the market when volatility increases and the trading range expands.

Rebate Trading

Rebate Trading is a equity trading style that uses ECN rebates as a primary source of profit and revenue. Considering the payment structure of ECN's paying per share. Traders maximize their returns by trading low priced, high volume stocks. This enables them to trader more shares and have more liquidity with a set amount of capital. Such styles were pioneered by day trading companies such as Domestic Securities and Momentum Securities. A major player in the rebate trading model was Barkley Trading, LLC. Barkley, a privately held firm, has been known to trade billions of low shares monthly and make up a considerable amount of the overall NASDAQ volume.

Some day trading strategies (including scalping and arbitrage) require relatively sophisticated trading systems and software. Many day traders use multiple monitors or even multiple computers to execute their orders.

A fast Internet connection, such as broadband, is essential for day trading.

Day traders do not use retail brokers, slow to execute trades, and with higher commissions than direct access brokers, who allow the trader to send their orders directly to the ECNs instead of indirectly through brokers. Direct access trading offers substantial improvements in transaction speed and will usually result in better trade execution prices (reducing the costs of trading).

Commissions for direct-access brokers are calculated based on volume. The more one trades, the cheaper the commission is. Where a retail broker might charge $10 or more per trade regardless of size, a typical direct-access broker can charge as cheap as $0.004 per share traded, or $0.25 per futures contract. A scalper can cover that cost with even a minimal gain.

As for the calculation method, some use pro-rata to calculate commissions and charges, where each tier of volumes charge different commissions. Other brokers use a flat-rate, where all commissions charges are based on which volume threshold one reaches.

Real-time market data is necessary for day traders, rather than using the delayed (by anything from 10 to 60 minutes, per exchange rules[6]) market data that is available for free. A real-time data feed requires paying fees to the respective stock exchanges, usually combined with the broker's charges; these fees are usually very low compared to the other costs of trading. The fees may be waived for promotional purposes or for customers meeting a minimum monthly volume of trades. Even a moderately active day trader can expect to meet these requirements, making the basic data feed essentially "free".

In addition to the raw market data, some traders purchase more advanced data feeds that include historical data and features such as scanning large numbers of stocks in the live market for unusual activity. Complicated analysis and charting software are other popular additions. These types of systems can cost from tens to hundreds of dollars per month to access.

Day trading is considered a risky trading style, and regulations require brokerage firms to ask whether the clients understand the risks of day trading and whether they have prior trading experience before entering the market.

In addition, NASD and SEC further restrict the entry by means of "pattern day trader" amendments. Pattern day trader is a term defined by the Securities and Exchange Commission to describe any trader who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period. A pattern day trader is subject to special rules. The main rule being that in order to engage in pattern day trading the trader must maintain an equity balance of at least $25,000 in a margin account.