Informational Text – What Is Day Trading?
Day trading is a fast-paced trading strategy where all positions are opened and closed within a single trading day. Because day traders avoid holding overnight, they eliminate the risk of unexpected news or events—called overnight gaps—that could dramatically move the stock price while the market is closed.
Day traders rely heavily on intraday price action, volume changes, and specialized real-time tools such as VWAP (Volume Weighted Average Price) and Level II order book data. Their goal is to capture quick price movements that may last from a few seconds to several minutes. Day trading requires sharp focus, disciplined exits, and the ability to interpret the flow of buying and selling pressure as it happens.
Scenario Example – OrbitSoft Breakout
OrbitSoft releases positive news before the market opens. As the market opens, the price surges above yesterday’s high with heavy volume. A day trader watching the stock sees:
- a clean intraday breakout, where price pushes above prior resistance;
- high relative volume confirming strong interest;
- and strong order flow on the Level II screen supporting the move.
The trader enters during the breakout, sets a tight stop below the breakout level, and sells minutes later as volume begins to taper off. Profit is secured before the move stalls or reverses.
Process Summary – A Simple Day Trading Workflow
- Scan for high-volume stocks or breaking news.
- Identify an intraday setup (breakout, reversal, pullback).
- Enter with tight stops to manage quick risk.
- Monitor price and volume continuously.
- Exit all trades before the market closes.
Vocabulary & Functional Definitions
- Liquidity – How easily shares can be traded without drastically affecting the price; essential for fast entries and exits.
- Volatility – The speed and magnitude of price movement; it creates both opportunity and risk for day traders.
- VWAP – Volume Weighted Average Price; a dynamic “fair value” line that many institutions watch as a decision anchor during the day.
- Breakout – When price pushes above a resistance level (or below support) with strength, often creating a sharp momentum move.
- Level II Data – Real-time order book showing where buyers and sellers are placing orders at different prices, revealing the depth of demand and supply.
Lesson Flow – How the Session Unfolds
Learning Target: I can explain how day traders use intraday patterns, volume, and volatility to make trading decisions.
Bell Ringer: Students examine a 1-minute chart and decide whether buyers or sellers appear stronger based on candle direction and volume.
Mini-Lesson: The instructor introduces the breakout pattern, VWAP, and the idea of avoiding overnight gaps. The OrbitSoft scenario is used as a narrative anchor.
Guided Practice: Together, students mark resistance, breakout level, stop-loss placement, and realistic exits on a provided chart.
Independent Practice: Students analyze a new intraday chart and design their own plan – scan, entry, risk, management, and exit – using the fields in the activity panel below.
Closure: Learners reflect on why day traders close positions before the bell and how structure, not speed alone, protects them from emotional decisions.