It is the most aggressive form of trading, and the one that attracts the most gamblers. There is little hope of any fundamental analysis methods having any effect, it is entirely technical trading.
There are two main schools of thought as to how one should day trade:
Market makers look for stocks that don't move at all, those boring issues that trade on heavy volume every day but don't move much in any particular day. If a stock is just sitting there trading between a narrow range where the bid price is $1.00 and the ask price is $1.05, in theory you can sit there all day long buying stock for $1.00 and then turning it around for $1.05. Of course the problem is that if the stock does actually move against you you may take a large loss that would amount to the gain of dozens of "scalper" trades.
Short term trading is highly risky for several reasons. First of all the profits you make won't be huge, few stocks are volatile enough to make large profits possible. The result is that your brokerage will be an enormous expense, this by itself will greatly tilt the balance of probabilities toward "the house", you must ensure that your losses are extremely small and infrequent to compensate for your small profits. In a few articles I will explain the concept of "risk of ruin", which will lead to an understanding of just why it is so important to have large winning trades and small losing trades. As your brokerage cost will be fixed, this will have the effect of reducing all your profits and increasing all your losses by a far more significant amount than someone with a longer time frame.
The other big problem of day trading is that you are operating with a severe disadvantage to the professional day traders in the "pit" at the exchange. They have far more information than you, being attached to large brokerages and with a direct line to every source of information out there. In the short term rumours move the market in strange ways, so you will find a lot of mysterious activity that can't be explained by your charts. Secondly, apart from the information gap, the pit traders have a lot more money than you, and they can see your buy and sell orders on their computer. They often deliberately conspire against the public traders to blow away their stop-loss orders and activate their buy stops by dumping large orders onto the market.
The result is a lot of "false breakouts" and whipsawing of amateur's orders. It isn't the most profitable way of doing things. (A whipsaw is a buy signal followed by a sell signal, followed by a buy signal etc all in quick succession. The result is you spend a fortune on commissions and make lots of aggravating losses.)
The amateur day trader is little more than cannon fodder for professional traders. You are operating at a distinct disadvantage to your opponents here. Be very wary of all those web sites and gurus that push various day trading systems. They are capitalising only on the whole excitement of the industry and attracting punter types. Apart from the professionals at the exchange, there are few other experienced traders who trade on this time frame. It is a sucker's market, just like a grand casino.
The Ronald Johnson Report was commissioned in 1997 to have a look at the profitability of traders at one New England trading firm, and probably represents the first such study since Thomas A. Hieronymous did his famous study in 1969. Apparently despite the great advances in technology since then trader success rates have little improved. The Johnson report found that 69% of the traders they examined lost money over the year and of the 31% that made money, few were day traders. The report concluded that day trading was not a profitable profession for most.
Closer examination of the Johnson report showed that it had perhaps a few flaws in it that might have tilted the results toward this conclusion.
The majority of traders reviewed were new at the game, which is common in trading.
It was found that the majority of trades were in thousand share lots, which by most standards is a fairly large trade size for a new trader to be taking, as you'll figure out shortly when you read up on risk of ruin. This is poor trading practice, no new trader has any business making large trades until they have established that they are capable of trading with consistency and profitability.
By separating the results of more experienced traders from completely new ones, those with less than 6 months experience lost money 74% of the time and more experienced ones lost 57%. These still aren't particularly promising figures and I would hesitate to recommend anyone embark on a career where your chances of losing money are so substantial.
Still, it isn't all doom and gloom. From the figures in the Johnson report, experienced successful traders do extremely well, around $8,500 a month on average, and the theoretical risk of ruin of the trader's accounts falls from around 34% for successful novices compared with 10% for more experienced traders. The risk of ruin for the unsuccessful traders was 100%, which probably accounts for why they weren't particularly successful. The lesson is that if you can stay in the game for at least six months and if you figure out money management you can eventually become profitable.
My "sermon" is not to recommend people don't trade, trading is a guilty pleasure I myself indulge in for fun and profit (a bit of both actually), but to insist that new traders keep in mind the massive risks involved in trading stocks and futures. Trading has a surprising amount in common with combat, to become a veteran you must first survive your first week of battle, and casualty statistics tend to show that green troops are far more likely to die than veterans. You need to learn trading survival before you will learn to profit by it.