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Day Trading

Day trading is the name given to day trading when the stock exchange is open. All positions must be closed at the close of the day at the end of the day. In contrast to long-term investors, small price fluctuations are usually used here. Day trading can be done on any asset.

The following points distinguish a day trader: 

  • Daily stock exchange trading with fixed working hours
  • Trading small movements in the market
  • Quick reactions to news and political decisions
  • Positions with higher capital and leverage

Many people want to get rich as a day trader, but how does it work and what is day trading? – As a trader with over 6 years of experience, I will explain to you how day trading works and which basics beginners and advanced traders should consider. I will give you an overview of this special trading method on the stock exchange and sustainable tips and tricks.

DAY TRADING BASICS – HOW DOES IT WORK?

Day traders trade the markets 5 days a week. Special focus is placed on the opening times of the stock exchange, because most traders are active there and the trading volume is very high. Day trading can be viewed like a normal job. You have fixed working hours and trade consistently on a daily basis.

Some traders prefer to keep trades running for a few seconds and others for hours. Day trading is adaptable to the trader’s wishes. The retailer is always dependent on the market. If there is no movement, you cannot make a successful trade. High volatility (movement) in the market is a day trader’s friend. 

Day trading can be compared to a normal job, but here you are paid by the market based on your own performance. Profits are realized by pricing the markets.

Which products do day traders trade?

  • Forex (currency pairs)
  • Raw materials (oil, wheat, etc.)
  • Metals (gold, silver, etc.)
  • shares
  • Cryptocurrencies
  • Government bonds
  • ETFs

Assets with high trading volume and volatility are popular. News for the markets is particularly interesting for day traders in order to generate a quick profit.

Day traders only trade derivatives or large positions in stocks. Derivatives are leveraged trading positions with an underlying asset (market). Various financial products can be used for this. In most cases, this means either CFDs (contracts for difference) or futures (forward contracts). CFDs are the most popular because the CFDs can be traded with very little starting capital and quick access to all markets is given.

Tips on financial products for day traders: 

  • CFDs are traded as contracts on futures, stocks , commodities & more. You can start with small capital .
  • Futures are traded directly on the stock exchange. A capital of € 20,000 or more is recommended here, because the minimum position sizes are very large.
  • Leveraged positions are necessary because only very small movements are traded.

My experience: The right choice of a market

Which markets should one trade in day trading? Many beginners ask themselves this question. From my trading experience and the knowledge of professional day traders, you should rely on liquid markets here. Accordingly, not every market is liquid (little trading volume) and is traded a lot.

For a short-term trader, it is essential to get a correct version in the market. The most traded markets are suitable for this, as the supply and demand is very high.

Recommended markets:

  • Stock indices (S & P500, DowJones, Dax30 etc. are highly liquid)
  • Major currency pairs (all pairs related to the USD are highly liquid)
  • Well-known raw materials (oil, gold, copper, wheat, coffee)

WHAT DO I NEED FOR DAY TRADING?

How do you start day trading? – Thanks to electronic trading and the Internet, it has become very easy to start day trading. All you need is suitable software and a broker . You can often use the software for any device (computer, smartphone, tablet). It offers you many analysis options in order to make the right decisions in the markets.

Beginners can create a free demo account. This is a virtual balance account and it simulates real money trading. You act without risk. It’s perfect for learning and testing trading.

In many cases, the broker offers one or more suitable trading platforms in addition to access to the markets. Thanks to the strong competition on the Internet, these are professionally programmed and offer everything you need for day trading.

You need: 

  • Day trading broker (gives you access to the markets)
  • Trading software
  • Start-up capital or demo account (practice account)

It is very important to have a fast internet connection. Sometimes milliseconds make the difference between a win and a loss. The broker also has to play along. Unfortunately, some providers offer too slow order execution. Therefore, the broker should be thoroughly tested before making a real money deposit.

Mobile day trading is possible:

Should you ever have to leave your workplace or desk and have a trading position open, you can check your trading account via the mobile app. Nowadays the programs for the smartphone offer you 90% the same functions as the trading software on the computer.

You only need one access to the account and can manage it with any device. You can also react immediately to news or political decisions. Day trading is universal and the software can be adapted to the trader.

Where is the best place to do and practice day trading?

It is important to choose a trustworthy provider. For a beginner and advanced trader it is usually difficult to find a suitable broker thanks to the very large offer. Often there are confusing advertising promises, which also have a negative effect on your trade. The basic rule is: the more advertising the broker does, the higher his fees will be.

The day trading broker should have the following properties:

  • Be regulated and licensed
  • Offer a professional trading platform
  • Provide 24-hour customer service
  • Offer instructions, webinars and training opportunities
  • Low trading fees
  • No hidden costs
  • A very fast execution for trades and high liquidity

So choose a suitable online provider to practice day trading. The following table gives you an overview of recommended brokers. I have compared them with other providers and tested them with real money. From more than 7 years of experience, I present you the top 3.

Learn the basics: The 3 most common mistakes in day trading

From my experience, many traders fail on the basics. It is important to understand these. It is best to write your own set of rules so as not to be destroyed by the market. In the video above you will learn more about the 3 most common mistakes made by day traders, which I have summarized in the following points:

  1. Times are very important in day trading because this is where the volume is determined. Every market has its own characteristics. There is a high trading volume, especially when the stock exchange opens and closes. Know your market and trading hours. It is also often the case that there is hardly any movement around lunchtime.
  2. News or news has a very strong influence on the market in day trading. You will feel great movements, especially in the small units of time. Use the economic calendar for this. The daily news and its influence on the markets are published there. The broker offers this in most cases or the “Investing.com” page.
  3. Correlations in the market are another factor. With currencies, for example, you can see very clearly that the USD is the driving force. Raw materials are also dependent on other markets. A correlation between different markets is very important for a day trader and his analysis. This enables unexpected movements to be anticipated.

The most important factor for success: risk management

In the end, it is still the trader who determines the risk himself. It is up to him what amount he wants to invest in the markets. Basic rule: the higher the risk, the higher the potential profit. Develop a strategy and set firm goals for trading. Good risk management can help a lot here. Professional traders risk 1-2% of the total capital per position. With a good win ratio, a high profit is possible every day. 

Learning day trading strategies and continuing education

Continuous learning is a day trader’s key to success. This also includes developing and trying out new strategies. Before opening a position, there is always a corresponding analysis of the market. Many brokers offer daily videos and live webinars for this purpose. For example, my recommended provider XTB has new learning videos almost every day.

Traders can prepare very well for the markets in a broker’s training center. It always depends on the service of the broker. Some companies offer really good training for beginners and advanced traders. Knowledge ranges from trade execution to strategies for successful trading.

What is day trading?

Day trading is the English term for “day trading”. Day trading means that the exchange trader opens trading positions every day and closes them again before the market close. Positions are not held overnight. Day trading can also be viewed similarly to a regular job where there are regular working hours (stock exchange opening times). The day trader moves in short-term units of time and trades often only last a few minutes.

Can you really make a living from day trading?

Yes – you can really make a living from day trading. This depends solely on your own success in the markets. Either you are a self-employed day trader or work as an employee. The day trader tries to increase his capital every day. He makes a living from the profits. It is an extremely complicated job and only the best make a living from it. Don’t think it would be easy to make a living from day trading!

What do you need for trading?

For day trading you need hardware (computer, smartphone, tablet), a broker account, trading platform, trading capital and of course an internet connection. Nowadays it is possible to carry out day trading on the go or anywhere in the world where there is internet.

Can I test day trading for free?

Daytrading can be tested for free by creating a demo account with a broker. This is a virtual balance account. You imitate real money trading and therefore have no risk. The demo account is available free of charge and in most cases completely unlimited. Use the virtual credit to get your first experience with the day trading trading style.