How to day trade

Day trading is when traders buy and sell an asset in the space of a single day to take advantage of price changes. Find out everything you need to know about day trading in this handy guide.
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Updated: Nov 9, 2022
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This page explains everything you need to know in order to become a successful day trader and increase your knowledge about investments. If you would like a clear and concise explanation of what day trading is before getting into the details, check out our definitions page first. 

Find an online broker to trade with

In the table below, we have listed the best day trading platforms right now. Our team of analysts have tested a wide variety of trading platforms and have selected these because of their low fees and general ease of use. Simply click on one of the links to get involved.

1
Min. Deposit
$ 10
Promotion
User Score
10
Up to $240 bonus!
Deposit with ACA, Wire, Pay with my bank
Invest for dividends and get payout on stocks on Ex-Dividend day
Start Trading
Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer
Full Regulations:
CySEC, FCA
Investoo Ltd is compensated if you access certain of the products or services offered by eToro USA LLC and/or eToro USA Securities Inc., as applicable. This compensation incentivizes Investoo Ltd to describe those products and services in favorable terms. Any testimonials contained in this communication may not be representative of the experience of other eToro customers and such testimonials are not guarantees of future performance or success.
2
Min. Deposit
$ 100
Promotion
User Score
10
Trade out-of-hours on over 70+ US stocks
Get exposure to a wide range of popular UK, US and international stocks
Enjoy flexible access to more than 17,000 global markets, with reliable execution
Start Trading
Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal
Full Regulations:
ASIC, FCA, FINMA, is a licensed bank (IG Bank in Switzerland)
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
3
Min. Deposit
$ 0
Promotion
User Score
9.5
$0 commission and $0 Options contract fees
Upgraded research with advanced charts
Smart Menus for faster trades
Start Trading
Payment Methods:
Full Regulations:

How to day trade – a step-by-step guide

Day trading is a sub-strategy within the wider trading thematic. So, if you want to find out exactly what trading is before going any further, we recommend our short-term stock trading course. You can then apply this information to any asset, such as cryptocurrency and forex.

In short, trading is the process of buying and selling shares in a short time period for a profit. Therefore, day trading is doing this in a limited time period of one day. We have outlined the key steps you need to follow below. 

  1. Assess your individual needs. Day trading can be intensive and isn’t suited to everyone. In general, it involves long working hours, very little room for time off, a high tolerance to risk, and a robust commitment to self-teach and continuously learn. Make sure you are comfortable with these traits before committing to day trading.  
  2. Set a budget (and stick to it). You should never day trade with money that you can’t afford to lose. Before you even think about signing up to a trading platform, make sure you have clearly established some financial constraints to keep you on the straight and narrow. 
  3. Decide what hours you want to trade. Since day trading requires plenty of self-discipline, you need to set the hours that you want to trade within yourself; after all, day trading doesn’t mean trading all day. This can help prevent you constantly checking the latest prices, and it can provide structure and organisation to your routine which will aid objective decision-making. 
  4. Choose a suitable day trading broker with low fees. When day trading, you will be frequently opening and closing buy and sell positions. Therefore, you need to make sure you are comfortable with the interface of your chosen broker, and you also need to make sure the trading fee and commission on each trade is reasonable. 
  5. Decide what you want to trade. Next, you need to choose some assets to focus on. When day trading, it is important you are informed about the financial instrument you are attempting to flip for a profit. Volatile assets like cryptocurrencies and certain stocks are popular for day traders, while the forex markets are also frequently traded in conjunction with leverage to maximise the small price movements.
  6. Conduct technical analysis. In order to accurately project market behaviour and make profitable trades as a consequence, you need to conduct technical analysis and due diligence for each asset. Chiefly, this involves familiarising yourself with reading a candlestick chart and having a firm grasp of the various metrics you can calculate using it. Check out our short-term stock trading course for more information.
  7. Consider implementing a stop-loss. A stop loss is like having the bumpers up when you are bowling – it stops you from scoring zero by protecting you from adverse market activity. It involves setting a price that your positions will automatically close at, so if prices begin to fall rapidly, your stop loss will be triggered, preventing you from losing all of your money.
  8. Practice your strategies on a demo account. Since day trading is difficult to master and the best way to learn the ropes is through firsthand experience, we recommend opening a demo account and getting to grips with things first before risking your capital. 
  9. Start day trading. If you have completed all of these steps to the best of your ability, it is likely that you are ready to make a go of day trading. Just make sure you retain a level head and stay cool, calm and collected. 

What is day trading?

Day trading is the practice of making regular trades of various assets in pursuit of profit, and closing all positions by the end of each day. Volatility is key to day trading because it provides the rapid price fluctuations necessary to generate trading opportunities.

Essentially, day traders conduct technical analysis on a chosen asset – such as a stock, cryptocurrency or fiat currency – and attempt open and close trades in the space of a day at prices that create returns. Day trading can involve both long and short positions, and the brief timeframe can result in dramatic gains and losses.

Whereas long-term investors focus on a stock’s fundamentals such as its balance sheet credentials, day traders are much more concerned about market mechanics, investor sentiment, and technical indicators. These metrics allow them to gain an accurate read on the market, generating predictions and knowing when to lock in and close a trade.

The key thing to remember is that day traders are more interested in how an asset is received and consequently valued by the market, rather than how much it is truly worth in objective terms. This is why day traders can make money by trading poorly performing stocks, while long-term investors with the same stocks would likely experience a gradual decline in their portfolios.

Key factors to consider

Trading fees

Because of the sheer number of trades you can expect to perform each day, your chosen broker’s stock trading fee will be much more frequently incurred than it would be for a long-term investor who buys assets a few times a year. 

So, you need to make sure that you are comfortable with the fee structure of your chosen platform. Some of the brokers in the table above offer commission-free trading, meaning that if you fulfil certain requirements, you won’t have to cover a trading fee out of your profits. 

Should I use leverage?

Leverage is very popular for day traders. It is the process of borrowing money or assets from a broker to maximise the size of your investment. So, if you invest £10, a broker may offer 5X leverage, allowing you to boost the size of that investment to £50. 

However, things are not that simple. Using leverage usually incurs fees, and while it increases your exposure to positive price movements, it also makes you equally vulnerable to negative price movements. As a result, you should definitely steer clear of leverage unless you are a highly experienced trader.

Why should I day trade?

Because it is the trading strategy that allows you to pursue returns the most aggressively, and it can be a route to financial independence if you dedicate yourself to mastering the craft. 

While these credentials do come at a cost – namely their elevated time-intensity – for those of you willing to do some extra groundwork and constantly check the latest price movements and market activity, day trading is a way to ensure your capital is constantly working for you. 

Still undecided?

If you aren’t yet convinced that day trading is a strategy that suits your financial needs and investment goals, check out our breakdown of the pros and cons of day trading below.

Pros

  • The potential to accelerate your returns – some trades take just a matter of minutes
  • You could become your own boss if you are successful enough
  • No long-term exposure to risk since positions are opened and closed quickly
  • No overnight risk since all positions are closed by the end of the day 
  • Your capital is constantly being put to work

Cons

Where can I learn more?

If you are keen to start day trading and want to educate yourself further, many of the brokers in the table above offer demo accounts for you to practice your strategies. Otherwise, you can check out the sidebar at the top of this page to learn about other investment options, or our courses directly below.

Stocks Courses
If our Stock Markets 101 course was your introduction to stock market investing, think of the Stock Investing course as the next step, your intermediate-level guide to investing. Just remember, this is not a get-rich-quick scheme and takes time, patience, and emotional stability.
Stocks Courses
Luckily, it’s far easier to begin trading than it was in the 90s when Wall Street and big money were the only options. Get started with our introduction to stock trading. You’ll come away feeling more confident about the task ahead, while acquiring a base knowledge of all the most…

Sources & references
Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

Charlie Hancox
Financial Writer
Alongside his passion for trading, Charlie has represented Great Britain and won national championships as a water polo player, and as a budding film director, has… read more.