Day trading can feel overwhelming, especially when you’re just getting started. But there’s one strategy I use that’s both easy to follow and highly effective, even for beginners. In this post, I’m going to walk you through a simple day trading approach that’s easy to execute and has shown consistent results since I started tracking it in 2020. Whether you’re a seasoned trader or a complete beginner, this strategy is a great way to get started with small-cap stocks without all the fast-paced decision-making.
Before jumping into any strategy, it’s essential to see how it performs. Many educators don’t show the full details of their strategies, which can leave you guessing about how well they actually work. But I believe in full transparency, which is why I post the performance of my strategies every month. I want you to know what works and what doesn’t.
For instance, take a look at February 2025’s stats, which are part of the data I’ve been tracking since 2020. But here’s the important takeaway: of the 24 trades I took that month, 18 of them followed this specific strategy I’m about to explain.
The Strategy Overview
This small-cap strategy is beginner-friendly and focuses on quality, not quantity. You won’t be chasing momentum or engaging in rapid scalping. The setup typically appears only a few times a week, and when it does, it’s usually a “one and done” trade. The goal is simple: predict the stock’s maximum potential and capture the majority of the move in a single trade.
Stock Selection
The first thing I do before the market opens is look for stocks with high premarket volume—at least 1 million shares. But volume alone isn’t enough. I also check the stock’s daily chart to make sure that the premarket volume is higher than any of the stock’s previous trading days.
For example, if a stock has a highest volume day of 600,000 shares but is showing 4 million shares in premarket, it’s a go. But if a stock’s highest volume day is 30 million shares and premarket volume is only 2 million, then it’s a no-go.
Identifying Major Consolidation
Next, I look for a strong initial move in the premarket followed by a major consolidation. Consolidation refers to when the stock price moves sideways in a range. If the stock shows more than one consolidation, I move on to another candidate.
Marking Key Levels
Once I identify the consolidation, I mark two key levels:
- Resistance: The premarket high
- Support: The bottom of the consolidation range
Setting Targets
I use three different target strategies for each trade. Personally, I aim to sell at target #2 or #3, but here’s the breakdown:
- Target #1: A 5% gain from my entry point (this is ideal for quick scalping)
- Target #2: Add the premarket range (the difference between the high and low during consolidation) to the premarket high. For example:
- Premarket high = $2.50
- Bottom of consolidation = $2.00
- Premarket range = $0.50
- Target #2 = $2.50 + $0.50 = $3.00
- Target #3: Double the size of the premarket range and add to the premarket high. Using the same example:
- Target #3 = $2.50 + $1.00 = $3.50
The Entry and Stop Loss
I enter the trade when the price breaks above the premarket high. To start, I use a wider stop loss, typically aiming for a risk-to-reward ratio (R:R) of 1:1 or 1:1.5. If the trade starts to go my way and more confirmation builds, I may add to the position and adjust my stop loss for a better risk/reward ratio. I always risk the same amount on each trade and I calculate my position size accordingly. You can learn how to do that in this video.
Patience and Discipline
This strategy doesn’t require quick decision-making like most other small-cap strategies. In fact, I often know hours in advance exactly where I’ll buy and sell. The setup isn’t available every day, so patience is key. You’ll need the discipline to wait for the right setup and hold the position until it reaches the bigger targets.
Want to See This Strategy in Action?
If you’d like to see my watch list of stocks that meet this strategy’s criteria and see me trade live, you can join me in the chatroom. I walk through each trade step-by-step, explaining why I chose the setup and how I manage the position. Plus, by joining, you’ll have access to even more strategies to enhance your trading and learn from my full approach.