Day Trading UK – Beginners Guide

Day trading is the trading strategy that involves buying and selling financial assets on the same day. Therefore, intraday traders typically use small price movements to speculate about the development of an asset from minutes to hours. There are many ways to invest in the financial markets, but more and more traders are turning to day trading. This investment strategy is an active trading technique that allows you to take advantage of market movements on the trading day.

This guide is designed for beginners so that they can easily understand that what is day trading and what are the advantages of day trading? How beginners can exploit profits by applying day trading. By the end, you can become an expert in day trading through this guide.

What is day trading?

Day trading

Day trading is the trading strategy that involves buying and selling financial assets on the same day. Therefore, intraday traders typically use small price movements to speculate about the development of an asset from minutes to hours. Day trading is one of the trading techniques that require the most attention and availability. You need to be in front of your screen to take advantage of every business opportunity that arises during the business day.

The main objective of day trading is to avoid paying overnight fees, also known as rollover or swap fees. Typically, these fees must be paid to the broker when holding positions overnight.

The intraday trading method usually relies on leveraged and margin trading products to amplify market movements. CFDs, or contracts for difference, are one of the most popular financial derivatives for investors with short-term strategies.

What can be traded in day trading?

Day trading has become the most lucrative market today. You can trade in stocks, CFDs, Futures, and Forex in day trading.

Forex

forex day trading

The forex market is the most popular and liquid in the world. A large amount of Forex trading is attractive to day traders. There are several short-term options for trending currency pairs and unparalleled levels of liquidity to allow you to start and close your trades quickly and smoothly.

Stocks

stock day trading

There are physical stocks of individual companies, common and leveraged ETFs (“long-traded funds” have multiple stocks or commodities and are traded like a single stock), futures, and stock options. Day trading is best for those who don’t want to follow the buy-and-hold strategy of stocks. For example, if CFDs or margin betting are used to speculate on stock prices, traders may also benefit from a price drop.

Options

Day trading options are a bit tricky because the value of the option contract varies over time and the price of the underlying asset. However, options open up a whole world of daily trading strategies as you can hedge your bets and profits even when the market is sideways.

Cryptocurrencies

The two most popular cryptocurrencies to buy right now are Bitcoin and Ethereum. With their spectacular growth, cryptocurrencies have attracted many new investors. The broker also helps retail clients access these markets. It is constantly being simplified to see one of these new blockchain-based currencies. Barriers to entry are now near zero. So, whether bullish or bearish, the time has come.

Day trading Strategies

Many day trading strategies are popular among traders to evaluate the market better. It is those who adhere to the short-term trading strategies, rules, and parameters faithfully that get the best results. The best strategies for day trading are-

Breakout strategy

A breakout strategy focuses on the point when the price reaches a certain level on the chart with a higher volume. Breakout traders take long positions after an asset or security breaks through resistance. Alternatively, take a short position when the stock price falls below the support line. When an asset or security trades above its set price limit, it usually increases volatility and tends to diverge. You need to find the right product to trade with. Know your asset’s support and resistance levels. The more often the price hits these points, the more validated and significant it becomes.

Scalping Strategy

scalping day trading strategy

The scalping strategy is one of the most used trading strategies. It is especially popular in the Forex market because it tries to take advantage of small price movements. The driving force is the crowd. They will try to sell if the deal is profitable. This is a quick and interesting way to trade, but it can be risky. High trade probabilities are required to compensate for the low risk/reward ratio. Beware of volatile commodities, attractive liquidity, and timing of value. You cannot wait for the market to appear and you should close your losing trades as soon as possible.

Momentum strategy

momentum day trading strategy

The momentum strategy is popular among beginners.  This strategy focuses on responding to news sources and identifying key trend movements supported by large volumes. There are plenty of opportunities, as at least one stock moves 20-30% every day. Hold the position until you see signs of retreat, then exit. Here you need to make sure you are aware of upcoming earnings news and announcements. Just a few seconds on each trade can make a difference in your daily earnings.

Reading technical indicators for day trading

Day traders rely primarily on technical analysis as the success of intraday trading is highly dependent on when positions are entered and exited. This method of market analysis is mainly performed by studying the change in price on a chart. This allows technical analysts to spot trends and identify areas where prices may react, such as support and resistance or pivot points.

There are many popular indicators for day trading. There are several categories of indicators that are RSI, moving average, and oscillators.

The most popular technical indicators for intraday trading are:

  • RSI
  • Bollinger Bands
  • Moving average
  • Fibonacci retracement

Day trading is for whom?

Intraday trading is ideal for short-term traders who do not want to hold their trading positions overnight to avoid overnight fees. It’s also an interesting technique to be completely disconnected from trading after a day’s work.

As trades are no longer open overnight, it also avoids the risky stress that can arise while the operator sleeps. Indeed, portfolios may experience large price movements due to events in other parts of the world.

Initial to start day trading

The first thing to remember is that you should only exchange money you are willing to lose and not borrow money to invest. Due to a large number of brokers available in the market, there are options for every budget. For example, you can start trading on the same day with a sum of €100. For many traders, it makes sense to start with amounts of $2,000 or more. The most important thing in intraday trading is that the cost of the transaction does not exceed the profit.

Pros & Cons of Day Trading

To evaluate whether intraday trading is right for you, consider the pros and cons listed below.

Pros

  • If you are willing to take the risks involved, you can get very high returns with day trading.
  • Get your daily results relatively quickly with day trading.
  • Intra day trading can double your profits.
  • High liquidity in day trading.
  • It opens the door to more business opportunities and strategies.
  • Through this, you can avoid nightly broker fees.
  • Through this, you can avoid price fluctuations that can happen overnight.

Cons

  • It involves high risk.
  • Taxes on day trading are heavy and that can hurt your income.
  • To start trading on the same day, you need to have enough money to lose if the trade doesn’t go as planned.
  • Learning day trading is hard. Day trading requires a steep learning curve, knowledge, and good strategy to be successful.

Best day trading platform 2021

The most important thing to do in day trading is to find out the best online trading platform. It is necessary to evaluate all the things while choosing an online platform. Since intraday trading requires responsiveness, the broker must be able to deliver fast execution times. Depending on your daily trading strategy, the tools and indicators you need should also be available on your trading platform. Remember that day traders have many positions per day. Therefore, brokerage fees such as spread, which is the difference between the bids and ask prices, should be as low as possible. Here we will discuss the top online trading platform-

eToro

eToro  daay trading platformimage

eToro Broker, a Cyprus-based financial services provider, is a highly regulated broker where you can learn to trade the same day on an interactive platform. eToro is a multi-asset platform and it offers an exciting environment for beginners to experienced traders who want to trade multiple markets within the same broker.

eToro has more than 2,000 assets in several categories such as cryptocurrencies, ETFs, stocks, indices, currencies, and commodities. You can invest in financial instruments through eToro with an initial investment of $200. eToro also offers research and technical analysis tools for social trading platforms that are available directly on the web. There is a very simple version and an advanced version with technical indicators and advanced drawing tools. This feature serves as a “comparative technical analysis tool”. eToro has also pioneered the development of a copy trading feature that allows investors who want to automate their day-to-day trading strategies to copy the trading positions of other investors.

Plus500

Plus500 day trader

Plus500 is easy to use trading platform. It is one of the best online CFD trading platforms. It is very easy to invest and trade in stocks, cryptocurrencies, commodities, options, derivatives, futures contracts through this trading platform. It is one of the best platforms for day trading methods. It generates real-time information for the traders. It provides a user-friendly platform that can be accessed by beginners also.

With a sleek user interface, price alerts, technical indicators, and real-time market prices for popular stocks, you can access everything you need to trade right from your phone on this platform. It allows you to set limits and stops to protect your stock trading position.

Capital.com

capital.com

Capital.com is a trusted, regulated, and comprehensive online brokerage. Capital.com brokers are recognized by thousands of people as an excellent online trading platform. The ultimate goal of this platform is to provide you with the best trading experience. The company is committed to meeting everyone’s needs.

Capital.com provides an enjoyable experience to its traders where new traders can also enjoy the trading. The website exists in multiple languages and can be easily used on a computer or smartphone. This trading platform is best suited to day traders because it doesn’t impose huge fees and traders can apply several day trading strategies through this platform.

How to start day trading

It is not tough to become a day trader; a trader can open an account with any online broker to initiate the trading. The following steps describe the process of starting same-day trading in a few simple steps using the recommended eToro broker.

eToro trading account

Step 1- Register and create the account

Once you select the online broker you have to visit the platform to register the account. It only takes a few minutes to sign up for eToro. To create the account you have to provide your email address and also create a strong password. You have to provide your basic information such as full name, address, and mobile number.

Once the account is created you have to verify the necessary documents. Verify your eToro account by providing the necessary documents once you are on the eToro platform, you need to click on “Full Profile” to complete the profile. In this way, you can complete your profile and verify your account to activate all the features of the broker.

Step 2- Make funding in your account

Click the “Deposit” button to deposit the funds in your account. This allows you to fund your eToro account using your preferred method. eToro charges no deposit fees and other fees. It accepts funds via bank transfers, debit cards, wire transfers, e-wallets, credit cards, and PayPal.

Step 3- Understand eToro’s day features

The eToro Marketplace has many features. As the world’s leading social media and copy trading platform, eToro allows you to share and access a wealth of information on a wide variety of financial assets. There is also the option to directly copy the portfolios of other successful traders.

Step 4: Use eToro ProCharts

If you want to take advantage of advanced charting and trading tools, you can use eToro’s ProCharts option. This gives you access to the many trading indicators and drawing tools not available on the underlying platform.

Step 5: Start day trading

Day trading involves multiple trades on the same day, so you can open a position when a trading signal appears. Then click “Portfolio” to check the job status. Click “Close” to close the position.

Day Trading tips

Here are a few tips for our beginners. Beginners should follow these tips for better results in day trading-

Record keeping

One of the fundamentals of intraday trading is to maintain a tracking chart with detailed earnings reports. Being able to quickly look back and see where you made a mistake can help you identify gaps and fix pitfalls to minimize your next loss.

Try the Daily Trading Simulator

The daily trading simulator allows you to familiarize yourself with the daily trading platform and test your strategy before betting real money. Ideally, the simulator should have a record before moving on to live to trade.

Risk management

You need a money management system that you can trade regularly. Is day trading worth it if you went bankrupt at the end of the first month? History shows that many successful traders never risk more than 1% of their balance in a single trade.

Stay tuned for news

Market news increases intraday volatility, so daily traders should always keep an eye on the news. Using news alerts is a great way to react to price changes as quickly as possible, whether you’re closing a trade or looking at an opportunity to get ahead in the market in general.

Focus on a single strategy and a single market

It’s better to have a strategy and market power than to get bogged down. Focus on consistently staying profitable before exploring a different strategy or trading multiple markets in one day.

Know when to go in the day

Some days the market is slow or things don’t go as planned. Better to stay away from your computer than to keep losing money on such a bad day. Tomorrow the market is here and will come back refreshed.

Conclusion

A daily trading strategy is suitable if you want to close all positions at the end of the day to take advantage of the price movements of various financial assets within a single trading session. As a very short-term trading technique, intraday trading is typically done through CFD brokers who offer a wide range of assets, robust platforms, leverage, and analytical tools tailored to their strategies.

To be successful as an intraday trader, it is important to control your risk well, always follow your trading plan, constantly improve your market knowledge and use a good broker like eToro to quickly and easily seize trading opportunities.

FAQs

Is intraday trading risky?

As with any type of investment, intraday trading carries the risk of capital loss. Intraday trading is primarily speculative through leveraged instruments as it takes advantage of relatively fast price movements. Because of this, day trading is not a trading style for everyone.

What is the expected return in day trading?

It all depends on your starting capital, how much risk you take per trade, and how serious your business plan is. The potential income you can earn from day trading will depend on your personality and the strategy you use.

What tools do I need to start trading on the same day?

Remember, you need the right equipment and powerful software to quickly identify and act on important financial information.

What is the initial capital required in day trading?

The first thing to remember is that you should only exchange money you are willing to lose and not borrow money to invest. The most important thing in intraday trading is that the cost of the transaction does not exceed the profit.