In 2021, the average day trader’s annual earnings were about $74,000. However,  how much a day trader actually earns depends on their trading strategies, available capital, and risk management practices.

How do you day trade, and how do you get started? What are the strategies and tips for beginners who want to day trade?

What are the common pitfalls of day trading, and how can you limit trading losses? Who can make a living in day trading?

This article discusses how day trading works and how you can start day trading. It also explains the strategies and tips to help you make the most of day trading.

Also included are the common mistakes day traders make, how to avoid or limit losses, and the types of people likely to succeed in day trading.

Day trading is one of many ways to earn money in the financial markets. Those who want to start day trading must learn the strategies and tips to help improve profitability and minimise risks.

Opening an online trading account gives aspiring day traders the flexibility, speed, and convenience of the internet when placing buy and sell orders. EverythingTrading.com offers both free and paid resources together with trading tools to help you increase your profitability and achieve financial success in day trading.

The Basics of Day Trading

Before you engage in day trading, you must have a basic understanding of how trading works. The following sections explain what day trading is and what assets you can trade.

What Is Day Trading?

Day trading involves buying and selling assets within a day. Unlike traditional long-term investing, day trading involves exploiting the up-and-down price movements in one trading session.

How Does Day Trading Work?

Day trading capitalises on the short-term price movements (volatility) of stocks, forex, and other financial instruments by buying and selling shares on the market.

The more a share’s price moves, the more potential a trader has to profit or lose in a single trade. Traders must exercise diligent risk management to increase profit while minimising losses.

What Can Be Traded?

Popular and lucrative day trading markets today include:

• Forex: Foreign exchange is a highly liquid market with a high trading volume, making this market attractive for day traders.

• Stocks: These securities include company stocks and ETFs (exchange-traded funds that hold multiple securities and are traded as a single stock).

• Cryptocurrencies: These instruments are similar to forex, except cryptocurrencies are digital, blockchain-based currencies.

• Commodities: These markets include oil, natural gas, metals, minerals, and grains.

Key Takeaways

• Day trading involves buying and selling securities like stocks or forex to profit from rapid price fluctuations during the trading day.
• Day traders can use various strategies and techniques to capitalise on perceived market inefficiencies to profit.
• Day traders can use technical analysis to read price movements. Traders must also have a high level of self-discipline and confidence when making trading decisions.

Terminology

Day trading involves various terms that may be unfamiliar to you. The following are some of the standard terms used in the trading world:

General

• Bear or bearish: A position in which you expect the stock to go down.
• Bull or bullish: A position where you expect stock prices to go up.
• Float: The available public shares to trade. A company with 100,000 publicly traded shares will have a float of 100,000.
• IPO: Short for initial public offering and happens when a company raises capital by selling a specific number of shares to the market.
• Market trends: The general direction a security heads to over a given time frame.
• Penny stocks: Any stock that trades below $5 per share.

How Does a Day Trader Get Started?

Prior to becoming a professional day trader, you must have a deep enough knowledge of how trading works in the marketplace. The following are what you need to become a successful day trader:

Knowledge and Experience in the Marketplace

If you start day trading without understanding the market fundamentals, chances are you’re going to lose money. 

Start by learning about chart reading and technical analysis. To gain confidence and trade like a pro, you must have a deep understanding of the market and its risks, including the factors that influence the charts’ movements.

You can also get the same trading tools, online expert coaching, and trading ebooks used by professional traders.

eBooks for Beginners

Aside from the resources you can find on the internet, Everything Trading also has a collection of ebooks to help you improve your day trading skills.

Education

You can also check out Everything Trading’s online courses, where you can take lessons from actual professionals and learn from those with actual field experience.

Sufficient Capital

Day traders must have enough capital to fund their trades and should only risk money they can afford to lose.

What You Need Before Starting Day Trading

Day trading requires plenty of preparation to improve your chances of success. Before you start day trading using real money, consider doing the following:

Have a Strong Knowledge of Technical Analysis and Day Trading Terminologies

Learning resources like books and videos can help you understand day trading terminology and technical analysis.

However, the information you get can be overwhelming or contradictory. What works for one strategy may not work for another.

Even if you learn 10 different strategies, consider choosing one that’s profitable enough for you, and stick to that strategy.

Understand the Factors That Impact Day Trading

Day traders usually focus on the following factors that affect intraday market behaviour:

• Liquidity: How easily and quickly you can enter and exit positions
• Volatility: How rapidly the price moves
• Trading volume: How often an asset is bought or sold in a given period

Choose How to Day Trade

Among the first things you must decide as a day trader, are which products you want to trade with and how. Derivatives like stocks, currencies, and commodities are popular for day trading.

If you’re trading in the U.K., your primary trading choices are spread betting and contract for difference (CFD) trading. These options let you trade without needing to own the underlying asset so you can open and close positions faster.

Create a Day Trading Plan

Consider outlining what you want to achieve in trading, and be realistic with your targets. Also, consider whether you’ll use fundamental or technical analysis to enter and exit positions.

If you prefer using fundamental analysis, you’ll likely depend on company reports and macroeconomic data announcements.

On the other hand, if you use technical analysis, you’ll likely focus on technical indicators, chart patterns, and historical data.

Develop or Adopt a Proven and Profitable Day Trading Strategy

To create your day trading strategy, prepare to spend months or years backtesting and refining your methodology. Doing so gives you enough data to help you make informed trading decisions and improve your overall chances of success.

You can also consider adopting an existing strategy proven to be profitable. You can make these strategies your own by making some adjustments to fit your trading style.

Learn How to Manage Day Trading Risk

A risk management strategy is essential in day trading to help prevent or minimise potential losses. If you’re an aspiring day trader, consider having risk management tools like trading stops and limits as part of your toolset.

Convert Knowledge to Skill by Practising in a Day Trading Simulator

Transform your knowledge into skill by practising your trading strategies. Consider using a trading simulator to test your strategies before you start trading with real money.

Open and Monitor Your First Position

If you’re confident with your trading plan and ready to make your trade, open an account with a trading broker.

You can buy a specific asset if you think it will rise or sell it if you expect it to decline soon.

By the trading day’s end, close all running trades and monitor your progress by keeping a trading diary of positions you opened and closed that day.

Day Trading Strategies and Techniques

To improve your chances of succeeding in day trading, consider following the strategies and techniques:

Discipline

A day trader should have the discipline to stick to your plan so you can improve your chances of reaching your financial goals and avoid losing money often.

Analytical Software

Trading software can be expensive but necessary for many day traders. Such software can help you with technical analysis to make trading decisions quickly.

Psychology

Trading psychology is the emotional aspect of a trader’s decision-making process, and it’s linked to emotions and behaviours, like fear and greed.

Mastery of your emotions and psychology can help you maintain control of your trades and prevent you from acting impulsively, which can result in losing money.

Bull Flag Strategy

A bull flag strategy relies on finding an asset with a long-term uptrend and high relative volume. Buy the asset when it breaks above its consolidation (sideways trading) pattern at a high volume.

The best time for trading the bull flag pattern is right after the market breaks out, when the trending market is strong, or when it’s near support or resistance.

Support is an area on the price chart showing buyers’ willingness to buy. Meanwhile, the resistance zone shows prices moving up because there’s more demand than supply.

Trend Trading

In trend trading, traders make money by buying or selling securities based on the trend’s direction. Traders usually buy assets on upward trends and sell on downward trends.

Swing Trading

Swing traders attempt to spot reversals in a market price’s movement and trade to profit from smaller moves. When swing trading, you try to profit from market swings of one day and up to several weeks.

Scalping

Scalping is a strategy in which the trader makes small but frequent profits that build up over time. When scalping, you should have a strict exit strategy. One huge loss could wipe out the many small gains you worked to achieve. 

Mean Reversion

The mean reversion strategy involves looking into assets that differ significantly from their historical average. Mean reversion traders profit by taking advantage of the asset’s return to its normal trajectory.

Money Flows

Money flow indicators use an asset’s volume and price to determine whether an asset is overbought or oversold.

A stock that reads 80 or higher can indicate overbought market conditions and signal the trader to sell. On the other hand, a reading of 20 or less suggests an oversold asset and can be a buying signal.

Algorithmic Trading

Algorithmic trading involves using bots that traders can program to create a trading strategy customised for intraday trading.

Arbitrage

In arbitrage trading, traders purchase assets on one exchange and then sell them on another. Traders profit from the price differences across exchanges.

High-Frequency Trading (HFT)

Large institutions can perform high-frequency trading using powerful computers that can execute large trading orders quickly.

News-Based Trading

News can be an essential source of finance-related events and market updates. Day traders can time their trades to coincide with anticipated company reports and announcements.

Deciding What and When to Buy

The following sections discuss how to decide which securities to buy and when to buy these assets.

What to Buy

Day traders can buy assets like stocks, currencies, commodities, and futures to make money. You should decide what to buy based on these assets’ liquidity, volatility, and trading volume.

When to Buy

After deciding what securities to trade, you must identify the entry points for trading. Tools that can help you include real-time news services, ECNs (electronic communication networks), and intraday candlestick charts. 

Deciding When to Sell

If you believe your existing position is profitable enough, you can consider several options to identify an appropriate exit point. 

Your options can include profit targets and trailing stops if you decide to exit. Once the price hits these targets, you can consider selling your position.

What Are the Best Day Trading Markets?

Choosing a market for day trading depends on what assets you’re interested in, how many of them you can afford, and how much time you’re willing to spend trading. Popular day trading markets include:

Shares

Trading in the stock market involves buying company shares and exiting your positions at the day’s end.

Indices

When you trade indices, you buy and sell assets based on the performance of a group of shares instead of one company. Examples of indices are the Financial Times Stock Exchange 100 (FTSE 100) and Standard and Poor’s 500 (S&P 500).

Forex

The forex market is an excellent choice for day trading beginners due to its high market liquidity and the numerous currency pairs you can trade.

Day Trading Charts, Patterns, and Technical Analysis

Three common tools that can be used to help determine opportune buying points are:

• Candlestick chart patterns
• Trading volume
• Trendlines, triangles, and other technical analysis tools

Day Trading Tips for Beginners

Aside from the strategies and techniques to help you create a game plan for your trades, the following tips can also help make day trading convenient and less stressful.

Setting Up

This tip includes opening an account with a trusted trading platform and accessing the best information sources online to give you a better chance of early success.

Online platforms like Zenfinex allow you to open a demo account for practising your trading strategies or a real money account for an opportunity to profit in your preferred markets.

Keep It Simple

There are so many markets to choose from, so consider focusing on only one at the start. Focusing on only one market or security can give you enough experience before you branch out to other securities.

Be Realistic

Even successful day traders have had their share of losses. Spend time learning about trading and practising the strategies to have a more realistic expectation of your results.

Knowledge Is Power

Traders must keep themselves updated with the latest financial news and events affecting the markets to be more prepared to make smart trading decisions.

At EverythingTrading.com, you can trust Acuity’s industry-class AI technology to help you analyse news output from across the world and determine market sentiment.

Set Aside Funds

Assess how much capital you can risk on each trade and commit to that budget. Many successful day traders commit less than 2% of their capital per trade.

If you have a trading account with a $10,000 capital, consider risking only 1% of that amount for each trade. This way, your maximum risk per trade is only $100 ($10,000 x 1% = $100).

Set Aside Time

A full-time day trader will need to spend many hours tracking markets and spotting opportunities that can happen at any time during trading hours.

Start Small

Focus on one or two assets per session so it’ll be easier to manage your trades since you have fewer things to think about.

Avoid Penny Stocks

Even if you’re looking for low-priced securities, consider avoiding penny stocks. These stocks are cheap but often illiquid (difficult to sell after buying). They also have a slight chance of making a profit.

Time Those Trades

The market opening hours are usually a period of price volatility because many orders placed by traders execute in this period. The middle hours are often less volatile, but activity picks up again before the closing bell.

Beginners who may become overwhelmed during peak trading hours should consider observing the market before making any moves.

Cut Losses With Limit Orders

You can prevent or minimise losses by using limit orders or market orders to enter and exit trades. 

A market order executes at the best available price with no price guarantee. On the other hand, a limit order guarantees a price but not execution.

Be Realistic About Profits

Not all strategies succeed all the time, but you can ensure that your winning trades make more profit than the amount lost on losing trades. Clearly define your entry and exit points to limit your financial risk per trade.

Stay Cool

Financial markets can stress you and test your emotions, especially when a trade doesn’t go your way. Learn to control your emotions and keep a cool head so you can make decisions logically rather than emotionally.

Stick to the Plan

In addition to keeping your cool, keeping your emotions in check can help you stay focused on your financial goals and strategies.

Keep a Record

Tracking your earnings on a spreadsheet can help you quickly look back and see where you succeeded or went wrong. The detailed report can also help you identify and address mistakes and minimise losses next time.

Timing

Different time zones separate many financial markets. For example, you’re in the U.K., and you start trading on the NASDAQ (National Association of Securities Dealers Automated Quotations) after finishing your work. In this case, you may miss the day’s best entry signals, costing you your chance to make a profit.

Sensible Decision Making

In day trading, you’ll have many decisions to make even before the markets open. 

Are your charts in order? Is your strategy ready for real money trading? Should you continue practising with a demo account? Answer these and other questions before making a decision.

All Day Trading Strategies Require Risk Management

Suppose you had nine successful trades that made $100 each, totalling $900 in profit.

On your tenth trade, your position goes down by $50. But instead of exiting and accepting the loss, you hold your position and hope the value goes up again. The price continues going down until you’re down $1,000 when you decide to exit.

This example shows that even if you have a high trading success rate, a few losing trades can wipe your profits clean if you don’t manage risk.

Learn to Play Defense

Mitigating losses should also be part of day trading training, even for a beginner. 

By having a defensive mindset and prioritising risk management, you’ll be well on your way to making bigger wins.

How to Limit Losses When Day Trading

The following tips can help prevent or limit your day trading losses:

Stop-Loss Orders

A stop-loss order helps limit your losses when your position’s price goes the other way.

Set a Financial Loss Limit

Unless you have an unlimited budget, you must set a maximum financial loss limit that you can risk. This way, you can exit your trade whenever you hit this point. Afterwards, take a rest and resume trading the next day.

Test Your Strategy

After determining your entry points and placing your stop-loss orders, test your strategy to see if it works for your risk limit and make necessary adjustments to minimise the risk.

Best Time to Day Trade

The best time for day trading depends on what assets you choose to trade.

If you’re trading stocks in the New York Stock Exchange (NYSE) and living in a different time zone, you may want to adjust your schedule to account for the NYSE’s opening and closing hours.

Trading the British Pound

The British pound is among the most popular currencies to trade. Forex traders usually estimate the pound’s value based on the British economy’s strength and the government’s political stability.

Trading Accounts

You must have a trading account to start day trading. The following are the different account options available for day traders:

• Cash account: Allows you to trade using only the capital in your account.
• Margin account: Allows you to borrow money to boost potential profits.

Day Trading With Cash vs Margin

Day traders can open a cash or margin account in the following ways:

Cash Account

A cash account lets you day trade as much as you like, provided you have enough funds as capital. The only way to increase your buying power is to increase the cash in your account.

Margin Account

If you’re a pattern day trader with a margin account, you can trade four or more times within five business days. However, you must maintain at least $25,000 in your account to become a margin trader.

Day Trading Rules for Margin Accounts

Margin accounts operate under the following pattern day trader (PDT) rules:

• You’re considered a PDT if you place four day trades within five days.
• You must maintain at least $25,000 in your margin account.
• If you fall below $25,000, you’ll be restricted from making more trades until you bring your balance up again.

Ways Around the PDT Rule

If you feel restricted by the PDT rule, consider day trading futures instead. These derivatives aren’t required to follow the PDT rule as stocks do, so you can day trade as much as you want.

What Makes Day Trading Difficult?

Day trading can be challenging because you’re trading against other market professionals who may have more trading experience, industry connections, and access to the best technologies.

Another hurdle is paying taxes on any short-term gains at the marginal rate (tax paid per dollar earned). Day trading can also have an emotional effect that can impact your trading.

Common Day Trading Pitfalls

Day trading can be a challenge for both experienced and inexperienced traders, so watch out for these common pitfalls:

Lack of Automation

Sitting all day in front of your computer monitoring incremental price movements can be exhausting and impractical. Automation can help manage this issue by automatically engaging in high-speed trading and backtesting your strategies based on past performance.

Misunderstanding the Market

If you don’t understand the market sufficiently, even the best trading tools will be of little help. Take time learning about day trading and understanding the market before risking your capital.

FOMO and FUD

Day trading can be highly stressful and can cause traders to fall victim to FOMO (fear of missing out)  and FUD (fear, uncertainty, and doubt), potentially leading to losses.

The Wrong Tools

Some strategies and tools work well in specific market conditions and trading types. Still, these tools can be ineffective or result in losses when misused.

Locked in a Position

Sometimes, a position can be easy to enter but difficult to exit due to reasons like illiquidity or insufficient activity to fulfil your order at your specific price.

Overemphasising Technical Analysis

Relying too much on such technical analysis indicators to determine trends and anticipate future price movements can cause you to ignore almost everything else.

Not Analysing the Correct Spread

Some users refer their trades to an order book (a list of buy and sell orders for specific securities) and mistakenly assume that these are the prices they’ll get when trading. 

Doing so can cause you to incorrectly analyse the spread and place orders based on wrong information.

Risks of Day Trading

Traders must be aware of the various day trading risks, which include the following:

• Severe financial loss
• Stressful full-time job
• Heavy dependence on borrowing money

Day Trading Example

A day trader makes a technical analysis of Applied Materials, Inc. (or AMAT, a stock listed in the S&P 500) and determines that the stock will increase its price by 0.5% compared to other stocks in the same index.

The trader may believe this pattern will continue and decide to buy 1,000 shares. If the price increases by 0.4%, the trader can sell their position within the day, thus completing a day trade.

Day Trading vs the Alternatives

Traders who find it challenging to handle day trading can also look into the following alternatives:

• Swing trading: Swing traders usually make their play over several days or even weeks, which makes it different from day trading.
• Robo-advisors: This option lets you choose an investing profile and preferred risk, and an algorithm performs all the investment calculations automatically.

Can You Day Trade Crypto?

You can definitely day trade cryptocurrencies, and there are trading platforms that allow you to do so. If you’re interested in trading crypto, we recommend Zenfinex, one of the fastest-growing brokers in the world. 

Zenfinex supports cryptocurrency trading, with more than 15 major crypto CFDs like Bitcoin, Litecoin, and Dogecoin.

Is Day Trading Crypto Worth It?

Some people may argue that crypto trading isn’t worth the risk, yet others who have been successful may say otherwise. 

One huge advantage of crypto trading is that the cryptocurrency market is usually available to trade 24/7, with no centralised market governance. Rapid intraday price movements mean more opportunities for traders, especially those with a developed risk management strategy.

How to Day Trade Crypto

Crypto day traders often look into which time of the day has increased market volatility or liquidity, which can provide significant gains.

Institutional investors, comprising the most significant number of cryptocurrency investors, often avoid trading on weekends because these days fall outside business hours.

Day Trading on CEX vs DEX

Day trading crypto allows you to trade in a centralised exchange (CEX) or decentralised exchange (DEX).

CEXs offer a more user-friendly platform for less-experienced day traders but come at a higher cost and less privacy. Meanwhile, a DEX is a peer-to-peer marketplace where you can trade with low trading fees and better privacy.

Crypto Day Trading Tips

While you can use crypto trading bots, you must also understand market dynamics and principles like price, liquidity, volume, market movement, standard deviation, and overbought and oversold zones.

Who Makes a Living by Day Trading?

Professional day traders usually have two classifications: those working alone and those in large institutions.

The Solo Day Traders

These traders trade with their own money or manage other people’s funds.

Access to a Trading Desk

Traders working for large institutions usually have access to a trading desk, which provides traders with instant order execution.

Multiple News Sources

News lets traders know about significant developments or updates, and multiple sources give traders more angles to work on a trading decision.

How Much Do Day Traders Make?

Determining how much a day trader makes depends on numerous variables, like the capital available for trading, market conditions, and skill level.

For example, the markets are open 252 days a year, and you’re trading with an average profit of $100 daily. From these numbers, you have a potential profit of $25,200 yearly ($100 x 252 = $25,200).

Day Trading Tools: Everything You Need

When you start day trading, you’ll need the following tools:

• Online brokerage
• Stock scanner
• Charting platform

Trade Execution

Day traders often require their brokers to have a fast execution speed because a few seconds can make the difference between catching and missing a breakout.

Commissions

Brokers offer day traders two commission pricing structures: per-share and per-trade. The choice depends on your position’s size and can determine whether you will have a profitable or losing month.

Stock Scanner

Stock scanners constantly scan the market and stream real-time results to traders to help them find the right stocks to trade.

Charting Platform

A reliable and robust charting platform can help traders visualise price action so they can make informed trading decisions.

Should You Start Day Trading?

If you believe you’re prepared for day trading, consider making the following commitments:

• Gain sufficient knowledge about day trading and a good understanding of your risk tolerance, capital, and objectives.
• Focus on a few stocks instead of trading too many securities.
• Stay calm, and don’t let your emotions affect your trades.

Why Day Trading Is Controversial

Many traders argue about the profit potential of day trading or whether the money gained is worth the risks. One significant issue is that many online day trading scams are luring amateurs through promises of substantial returns in a short period of time.

Importance of the United Kingdom to Global Economics

The U.K. is home to more than 67 million people and has a GDP (gross domestic product) of more than $3 trillion. The country’s economic freedom score of 72.7 makes the U.K. the 24th freest economy in the 2022 Index of Economic Freedom.

Fewer and Fewer IPOs

In 2019, the U.K. experienced the fewest IPOs (initial public offerings) in the LSE  (London Stock Exchange) since 2016. In the second quarter of 2020, the LSE had zero IPOs.

Fortunately, the IPOs started picking up their pace by the fourth quarter of 2020. By 2021, the LSE had 44 IPOs, the highest since 2016. This figure presents more opportunities for day traders to look into more stocks.

Taxes and Regulations

When trading in the U.K. markets, take note of the following taxes and regulations:

Taxes

In the United Kingdom, day trading-related taxes are based on three factors:

• Speculative or similar to gambling activities: Day trading profits are likely free from business, income, and capital gains tax.
• Substantial self-employed trading activity: Day trading may be subject to business tax.
• Significant activities of a private investor: Gains and losses fall under capital gains tax, so paying the business tax only can result in financial penalties.

Regulations

U.K.’s Financial Conduct Authority (FCA) regulates the country’s day trading industry. This agency has regulations for forex and CFD trading and regulates the amount of leverage traders can use.

FAQs

• Is day trading legal?

Day trading is legal if you’re trading with a legally operating and regulated provider.

• Is day trading a good idea?

Day trading may be suitable for traders who can find well-performing securities, but day trading may not be advisable for risk-averse traders or those who can’t put in enough hours for this activity since day trading requires a full-time commitment.

• Is day trading good for beginners?

Day trading can be profitable for beginners as long as they learn the basics, practise trading strategies, focus on a few assets, and keep their emotions in check.

• Is day trading gambling?

Day trading may appear similar to gambling since you’re placing a stake that the price movement will trend toward your desired direction. But in trading, you can decide when and how much you want to sell your position.

• Are penny stocks the same as day trading?

Penny stocks and day trading are different terms. Penny stocks are securities that trade for less than $5 per share. Meanwhile, day trading is a method to buy and sell assets within a single day.

• What is a trading platform?

Trading platforms allow traders to directly buy and sell stocks, ETFs, investment trusts, and other assets instead of relying on a financial advisor.

• What type of trading account should I choose?

Choose a cash account if you want to trade with cash only. Consider opening a margin account to boost your buying power beyond your cash limit.

• What fees will I pay?

Some of the fees you’ll pay when trading are:

• Share trading fees
• Foreign exchange fees
• Platform fees
• Withdrawal fees

• What are fractional shares?

Fractional shares have a value of less than the price of one share. If you own 1/10 of a $1,000 share, your fractional share is worth $100.

• What tax will I pay for buying and selling shares?

The taxes you pay for buying and selling shares include income and capital gains tax. There may be other taxes involved, especially when trading foreign shares.

• What are “limit orders” and “stop-loss”?

Limit orders are commands to buy or sell shares at a specific or better price. A stop-loss order helps limit your risk exposure when trading shares by placing a ceiling on potential losses.

With stop-loss and limit orders, you can set a price and trigger an instruction to buy or sell a specific share once the price is reached.  

• What’s trading “on margin”?

Trading on margin means borrowing funds from a broker to boost profit potential instead of relying on cash alone.

• Is it possible to invest in U.S. stocks?

You can invest in U.S. stocks even if you’re trading from a different country as long as your trading broker or platform can access such markets. 

Choose Zenfinex, a trading platform that can give you instant access to multiple markets and superior customer service with offices around the globe.

• What do I need to know about buying U.S. shares?

Trading U.S. shares require paying applicable share trading and foreign exchange fees. You must also fill out a W-8BEN form that gives you a withholding tax reduction for qualifying U.S. dividends and interest.

• What regulatory protection should I look for?

Check the FCA register to see if your provider is authorised to operate. You can also access the Financial Ombudsman Service (for complaints against trading providers). 

At the same time, you can check out the Financial Services Compensation Scheme for claims against providers going out of business if any issues arise.

• What should I consider before share trading?

Investing in shares can be an excellent way to produce high returns. Consider a buy-and-hold strategy if you want a lower-risk option than day trading.

• What makes day trading and swing trading different?

Unlike day trading, which involves trading in one day, swing trading typically happens between a few days to a few weeks.

• What is day trading’s first rule?

In day trading, the first rule is to never hold a position after the market closes for the day. You must sell whether you win or lose.

• What are the margin requirements for day traders?

The Financial Industry Regulatory Authority (FINRA) rules state that a broker-dealer client designated as a PDT (pattern day trader) must have a minimum equity requirement of $25,000.

• What is day trading’s buying power?

The FINRA rules mention that a client designated as a PDT can trade up to four times the client’s excess maintenance margin.

• Which trading strategy is easiest for beginners?

Trend trading may be among the easiest strategies for beginners since you only need to follow trends to decide whether you will buy or sell.

• Is fundamental analysis or technical analysis more appropriate for day trading?

Technical analysis can help traders identify short-term trading patterns and trends necessary for day trading. Meanwhile, fundamental analysis focuses on valuation and is better for long-term investing.

• Why is making money consistently from day trading difficult?

Day trading requires skills and practice to make money consistently. Implementing strategies like stop-loss or limit orders and maintaining discipline can be challenging for beginners.

• Should I hold a day trading position overnight?

Day traders should ideally close their trading positions before the market closes. Still, some traders may hold those positions overnight to increase profits on winning trades or reduce losses on poor trades.

• How does the pattern day trading rule impact day traders?

Making four or more day trades in five business days makes you a PDT, and you’ll be required to maintain $25,000 in your account.

• What software should I use to day trade?

Once you open an account with a trading broker, you won’t need special software to start day trading since your broker will provide the platform.

• How much money do I need for day trading?

How much money you need depends on your trading goals and how much extra money you can spare for trading.

• Is day trading still profitable?

Many investors can lose money in day trading. You can still profit from this activity by practising your strategies and having the discipline to stick to your plan.

• Can I make money in day trading?

While there’s no guarantee that you can make money in day trading, you can implement stop-loss and limit orders to prevent or minimise losses.

• What are the costs associated with day trading?

You’ll be charged a commission if you’re trading shares through CFDs. Meanwhile, other markets charge by the spread.

References

1. 1. Is Day Trading Profitable? How to Get Started https://www.investopedia.com/articles/active-trading/053115/average-rate-return-day-traders.asp
   2. What Are Penny Stocks? https://www.investopedia.com/terms/p/pennystock.asp
   3. 10 Day Trading Tips for Beginners https://www.investopedia.com/articles/trading/06/daytradingretail.asp
   4. 6 Most Popular Currencies for Trading
      https://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp
   5. Pattern Day Trader (PDT): Definition and How It Works
      https://www.investopedia.com/terms/p/patterndaytrader.asp
   6.  United Kingdom
      https://www.heritage.org/index/country/unitedkingdom
   7. Number of IPOs on the London Stock Exchange (LSE) in the United Kingdom (UK) from 1st quarter 2016 to 4th quarter 2021
      https://www.statista.com/statistics/325218/uk-lse-ipos-numbers/
   8. Day Trading: The Basics and How to Get Started
      https://www.investopedia.com/articles/trading/05/011705.asp