How do I Start Day Trading?
Day trading is when you buy and sell something in a trading day. If you trade online, you would secure your profits before the markets close by closing your position.
Brokers will sometimes use terms such as 'active' or 'day' Traders. Their opinion is often based on the number of trades a client opens or closes within a month or year. Some brands even refer to 'hyper-active traders' which defines a user that traders more than an active user.
Day trading is normally done by using trading strategies to capitalise on small price movements in high-liquidity stocks or currencies.
What can you Trade Online?
Forex means foreign exchange. It is the most popular market in the world. Traders can use the markets six days a week all day long, this is attractive to someone with a full time job who works all day long and has the evening to explore the forex market.
These are physical stocks in individual companies, regular and Leveraged Exchange Traded Funds. They hold multiple stocks or commodities.
Trading stocks intraday offers different opportunities than a traditional 'buy and hold' strategy. Speculating on stock prices via CFDs or spread betting for example, mean traders can profit from falling prices too. Margin or leverage also reduce the capital required to open a position. You can make your decision based on news reports.
Bitcoin and Ethereum are the most popular types of cryptocurrency right now.
Spectacular growth has seen cryptos attract many new investors. Brokers are also ensuring retail access to these markets is less complicated. These currencies are being simplified all of the time, whatever your experience - you could trade on cryptocurrencies, with education.
Physical items such as gas, oil, metal and minerals.
The future price of a security or a commodity.
The timing and return on a successful trade are known in advance.
Regulatory changes have affected the availability of binaries to UK traders – though professional traders can still use them. This has changed over time and these products are now offered by established brands. The key thing to ask yourself is: will this rise in value, or not? With the downside limited to the size of the trade, and the potential payout known in advanced, understanding binaries is not difficult. A different method of trading is used for binaries and any day trader can trade these.
Index funds are great for the future as they usually increase in value but are not essential for day traders.
How to Start Trading?
Use a live demo account so you are aware of what you will be paying for. You won't be losing money if you use the live demo account first to learn how to trade.
We would recommend watching videos online of how to start day trading, use trading apps and read beginners trading books in order to educate yourself on the basics before you start to use your money and potentially lose it.
Day trading chart patterns paint a clear picture of trading activity which helps you to see someone's intentions. They could highlight GBP day trading signals for example which may help you decide if you want to make a trade.
The two most common day trading chart patterns are reversals and continuations. Reversals show a trend will reverse once completed. Continuations suggest the trend will continue to rise. Understanding these trading patterns, as well as 'Triangles', 'head and shoulders', 'cup and handle', 'wedges' will help you make decisions in trading and will expand your knowledge.
What Tools can I use in my Trading?
If you rely on technical indicators, you are likely to use software rather than the news. The best analytical software will have:
Automatic Pattern Recognition
Identifies flags, channels, and other indicative patterns
Genetic and Neural Applications
Profit from neural networks and genetic algorithms to better predict future price movements.
With direct links to brokerages, you can automatically perform trades, removing emotional distractions and making the execution process a lot smoother.
Applies strategies to previous trades to demonstrate if they were profitable or not. This enables traders to better understand how a trading method may perform in the future.
Multiple news sources
Online news feeds and radio news alerts are the core of day trading.
What Day Trading Strategies should I use?
You need accurate data in order to concoct a strategy. You could make a spreadsheet with this data to help.
Some of the strategies for day trading include: swing trading, a day trading exiting strategy, making decisions upon the news and trading zones.
Short term trading strategies will gain your results as you will not be having small losses over a period of time.
What Type of Trading Accounts are there?
You can pick which trading account you need based on your trading needs as an individual.
Day trading with a cash account (also known as without margin) means that you only trade the capital you have in your account. This limits your potential profits, but it also prevents you from losing more than you can afford. This is the most simple way to trade.
This type of account allows you to borrow money from your broker. This means you could create large potential profits. It also means you could have large potential losses and so you will have to pay the broker back. Most brokerage firms will insist you put down a minimum investment before you can start trading on margin so that they know you have some capital and you are likely to pay them back. You can also experience a margin call, where your broker demands a greater deposit to cover any losses that may occur.
This account is for someone that has experience and more trading capital than your average trader. Professional traders can remove the restrictions that European regulators have placed on retail traders. This means UK traders can still access leverage levels of 1:500, rather than the ESMA (European Securities and Markets Authority) imposed limit of 1:30 for Forex and 1:2 for cryptocurrencies.
What are the Taxes on Trading in the UK?
When filing your tax returns, always take legal advice so you know that you are following the laws around trading in the UK.
You are unlikely to be charged tax when day trading as it is seen as a speculative activity.
If you invest privately, your gains and losses would be eligible to be taxed via the capital tax regime. You are likely to experience consequences such as fines if you do not pay capital tax and only business tax.
A self-employed trader is likely to pay business tax.
Which Forex Broker Should I use?
Check the reviews for a broker. Do they offer support? If so, what type? A live chat feature is useful as you can reach someone straight away whereas with an email you have to wait for a response.
Also, look at the cost and commission rates for the broker. Active traders will be trading regularly and therefore minimising the costs is significant.
Make sure that the broker is regulated by the Financial Conduct Authority (FCA) as this will protect you when using the broker.
How do I Control Emotions when Trading?
If stocks start to fall, many traders will choose to liquidate their holdings. They are doing this because they are scared of losing, but whilst doing this - they are taking their opportunity away to gain money. If you focus and remain level headed, you will be able to make the correct decision instead of making one out of fear.
Don't be greedy - be practical about the trades that you are making and be aware that someone else is likely to be better than you at trading, but use this to develop.
What are the best Trading Strategies?
Swing traders will trade for several days or weeks. This method may be useful for someone that wants to do different things as well as trading.
This method is useful for long periods of time. It includes real estate, stocks and bonds. It does not make much of an impact on your daily life, it is more security for your future.
To use this method, you pick an investing profile and advise your degree of risk and how long you would like to invest for, then the algorithm will advise you what trades to perform. It seems too slow compared to day trading.
This is when traders follow someone else't trades. You can find traders on social media who are open about what they are trading. It does take time to find someone whose trades you would like to follow, but people use this method often when they are busy as they are just copying someone else.
Other Trading, Forex and Stock resources
You could simply search trading for beginners or day trading into your browser and see what search results you are given. Just a few that we recommend are: podcasts, videos, forums and newsletters from training providers or brokers.
If you are serious about making trading your main source of income, you could hire a mentor to help you to trade.
Trading, Forex and Stock Terminology/Definitions
We have put together some of the jargon used in trading. This terminology guide will help you understand what it means.
This is the rate your broker will multiply your deposit by, giving you buying power.
Automated trading systems are programs that will automatically enter and exit trades based on the criteria that you enter. They are also known as algorithmic trading systems, trading robots, or just bots.
Initial Public Offering (IPO)
This is when a company sells a fixed number of shares to the market to raise capital.
This is how many shares are available for you to trade.
This numeric value measures the fluctuation of a stock against changes in the market.
These are any stocks trading below GBP1 a share.
Based on a percentage basis, this is a measure of a system's ability to generate profit instead of loss.
This is the price at which you buy and enter your position.
This is the price at which you sell and exit your position.
If you take a bullish position day trading you expect the stock to go up.
If you take a bearish position you expect the stock to go down.
This is the general direction a security is heading over a given time frame.
These pre-programmed keys allow you to enter and exit trades rapidly, making them ideal if you need to exit a losing position as soon as possible.
Trading Charts, Graphs, Patterns & Strategy
This is the price level where the demand is strong enough that it prevents the decline in price past it.
This is the price level where the demand is strong enough that selling the security will eradicate the increase in price.
They provide you with vital buy and sell signals. Whilst they won't tell you in advance if a change is imminent, they will confirm if an existing trend is still in motion. Use them correctly and you can tap into a potentially profitable trend.
Relative Strength Index (RSI)
Used to compare gains and losses over a specific period, it will measure the speed and change of price movements of a security. In other words, it gives an evaluation of the strength of a security's recent price performance.
Day Trading Tip
this index will help you identify oversold and overbought conditions in the trading of an asset, enabling you to steer clear of potential pitfalls.
Moving Average Convergence Divergence (MACD)
This technical indicator calculates the difference between an instruments two exponential moving averages. Using MACD can offer you straightforward buy and sell trading signals, making it popular amongst beginners.
They measure the high and low of a price in relation to previous trades. They can help with pattern recognition and enable you to arrive at systematic trading decisions.
This ticker symbol for the Chicago Board Options Exchange (CBOE), shows the expected volatility over the next 30 days.
Stochastic is the point of the current price in relation to a price range over time. The method aims to predict when prices are going to turn by comparing the closing price of a security to its price range.
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