While there are many investing methods in the financial markets, more and more traders are turning to day trading. This investment strategy is an active trading technique that allows you to profit from market movements over a trading day. Find out in this guide what day trading is and how to get started for beginners.
So, what is day trading? As the name suggests, day trading is a strategy that involves buying and selling financial assets on the same day. Therefore, the day trader generally takes advantage of small price movements to speculate on the evolution of an asset from a few minutes to a few hours.
Day trading is one of the trading techniques that requires the most attention and availability. Indeed, you must be in front of your screens to take advantage of each trading opportunity that presents itself during a trading day.
The main goal is not to pay overnight fees, also called rollover or swap fees. These fees generally have to be paid to your broker when you hold a position overnight.
A method of intraday trading, day trading generally relies on leveraged products and margin trading to amplify market movements. CFDs or Contracts for the Difference are one of the most popular financial derivative products for investors with short-term strategies.
CFDs act like a financial contract in which you and your broker exchange the value of an asset between the opening price and the closing price of a position. This way, you do not own the underlying asset that the CFD is dealing with. You are only speculating on the change in its price.
Additionally, online CFD brokers are generally good platforms. They offer plenty of markets, robust trading platforms, and reasonable trading fees. You still have to use the right broker …
What markets can I do day trading in?
Day trading is a strategy of taking advantage of price movements during a trading session without holding open positions overnight. Thus, it is possible to do day trading in any market available through your broker. Among the most popular are:
- Forex
- Stocks
- Indices
- Commodities
- Cryptocurrencies
Finally, significant volatility on the securities and other assets is the second important condition. It is volatile when the variations that it registers during the sessions is important (more than 5%). The Day trader will look for these values for his operations; the variation must be relatively large to generate profits during the day.
It is most often the technology stocks that will be privileged. Their daily variations frequently exceed 5 to 10%, enough to give the day trader some margin.
Choosing a day trading broker
Since day trading requires responsiveness, your broker needs to be able to offer quick turnaround times. Depending on your day trading strategy, the tools and indicators you need should also be available in the trading platform.
Remember, a day trader takes many positions per day. Thus, brokerage fees such as the spread, which is the difference between the bid price and the asking price, should be as low as possible.
How much capital to start day trading with?
The first thing to remember is that you should only trade with money you are willing to lose and never borrow to invest.
With the many brokers available in the market, there are options for all budgets. For example, you can start day trading with the sum of € 100. For many traders, starting with an amount of $ 2,000 is reasonable.
The most important thing when it comes to day trading is that your trading costs do not outweigh your profits.
