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Day tradingBest Indicators for Forex Day TradingIn this brief article, we will be talking about the most profitable and accurate indicators for day trading Forex so that the life of every day trader could be made a little easier.
A forex indicator is a technical indicator (i.e., measure) that helps the trade examine the market's data. Forex indicators take many things into account, including currency price, volume, and market performance.
With the help of the indicators mentioned in this article, you can make better predictions about the behavior of the market in the future. This is exactly why they're a hot topic among traders, as they're set-in-stone algorithms, many of which have stood the test of time for decades on end. Thousands of day trading strategies have been built on these indicators, and many of them have been successful.
So, at this point, it must be quite clear to you what signal and forecast indicators are and why they are important for day trading. Now, with that behind us, let's take a look at the best indicators for Forex day trading.
The Top Indicators Used in Day Trading
When looking at the best indicators, it is important to understand their workings and how exactly they will impact your trading decisions. Let's look at the three best forex MT4 indicators with a brief explanation of how they work and what they indicate.
1. Uptrend/Downtrend
By looking at this trend, you can get an idea about the market's current momentum. Namely, analyzing all the historical highs and lows can be quite a valuable piece of data for your day trading choices. Although the market incentive isn't always right, more often than not, it's worth paying attention to. Most experts regard it as being the simplest—yet the most accurate—forex indicator.
Relative Strength Index (RSI)
If you've dabbled in forex trading in the past, you've probably already heard of RSI—an oscillator that indicates whether the market is overbought or oversold. With most assets, you can tell that a market is overbought when the RSI value goes over 70. On the other hand, when a market is oversold, the RSI value will drop below 30.
Namely, the RSI indicator alone may not prove to be the most important one for day trading, as it can be easily influenced by sharp and sudden price changes, causing it to give false signals on rare occasions.
However, an experienced trader will be able to look at the RSI index in combination with other important signals and principles, like the 25k day trading rule, and effectively set themselves up for a successful run in the forex market.
Exponential Moving Average (EMA)
The EMA can be quite a beneficial day trading indicator and is primarily used in conjunction with the RSI. Using these two chart indicators together often makes for an accurate reading of the market, making day trading forex successfully a much easier feat.
Regarding the latter, the EMA works by weighting prices and then giving a reading to gauge the market situation. Much like the RSI, the EMA index can be influenced by sudden changes in market prices to give out an inaccurate reading. Still, when used in conjunction with the RSI by a relatively experienced trader, it can prove to be an excellent tool for forex day trading.
Day tradingGuide to Day Trading Stocks for BeginnersWhen the global economy was shut down due to the COVID-19 pandemic, millions of people had nothing to do except watch CNBC, stare at their Robinhood trading accounts, and speculate on bankrupt companies. Dave Portnoy of Barstool Sports became the poster child for this activity, admitting that he would eventually stop day trading when the economy reopened.
Well, the time has come. Countries are reopening, but are individuals abandoning their day trading strategies to return to some semblance of normalcy?
Not quite. It is still a popular investment tool for many armchair traders who have developed a knack for finding patterns and enjoying a portfolio that is in profitability territory. For those who are entering this investment realm, there are many things you need to know before diving into volatile stocks or installing the latest day trading software on your computer.
Suffice it to say, day trading is not as simple as "buy low and sell high."
What Is Day Trading?
Day trading consists of buying and selling an asset repeatedly within a trading session and then closing your positions by the closing bell. Day traders can be institutional investors and retail traders looking to generate a positive return by speculating on the movement of exchange-traded funds (ETFs), futures, commodities, stocks under $5, forex, CFDs, and more.
Things to Do Before Trading With Real Money
When investing in the stock market, it is crucial to become acquainted with a wide range of factors before you begin trading. This is critical as it will ensure you are equipped with the knowledge to increase your day trading or swing trading acumen.
To help you out, ensure you do the following things:
Learn the Terminology
So, what terminology should you know? Let's list off a few that are imperative for day traders:
Pattern Day Trader (PDT)
This is an investor who executes at least four trades of a security in a five-day period and holds a minimum account balance of $25,000 (this is known as the over 25k day trading rule).
Bid/Ask Price
The bid is the price investors are presently bidding at, while the ask is the price traders are asking to sell the stock at.
Float
The number of outstanding shares available to trade in the open market.
Scaling
A day trader enters a position by partially scooping up shares at $4.75 and then adding more shares at $4.99.
Scalping
The investor will profit off small intraday price movements and turn a quick profit by trimming at the top.
Learn the Strategies
Every day trader should utilize a strategy rather than buying and selling on a whim. This could consist of monitoring charts, engaging in technical analysis, or using specific tactics.
Essentially, not using a strategy is like walking around blind without a cane.
So, what type of plan should you incorporate into your overall day trading strategies? There are quite a few, but only a few are popular, such as the following:
Bullish flag pattern
A bullish flag formation can be located in stocks that enjoy impressive uptrends and flash good continuation patterns. To help you spot this, read our beginner's guide to candlestick charts.
Pullback trading
First, find an investment that maintains an established upward trend. Second, spot a price decline from the trend. Third, pick your entry point and hit the buy button on your list of volatile stocks.
Buy the rumor, sell the news
Be it a war in Europe or disappointing corporate earnings, you can garner a position in a stock or commodity ahead of the news and then sell the asset when the developments come out.
EMA indicator
The exponential moving average (EMA) indicator is an average price calculation over a period that emphasizes the most current price data.
Practice With Demo Accounts
Indeed, day trading can be challenging. If knowing how to pick stocks for day trading was easy, everyone could do it and turn a quick profit. While most day traders lose money, many are successful by sticking to a routine: wake up early, study the markets, and remove emotion.
That said, you can perhaps maintain a pattern of profitability by practicing this investment strategy. The best way to hone your craft is by opening a demo account or participating in a trading simulator. This way, you are not using real money and can test out other charts, strategies, and indicators.
What You Will Need to Day Trade
Ultimately, there are three necessary things you will need to day trade properly and successfully:
1. A Brokerage Account
Before you begin day trading, you will need a brokerage account, which you can determine by best order execution, platform technology, or mobile app. To help you choose, read our Top 6 Forex Brokers for Day Trading.
2. Finances
And, of course, if you are a professional day trader, you will need to fund your account with a minimum of $25,000. Is day trading without 25k feasible? Yes, but you will need to make some adjustments.
3. Strategy
Next, pick your day trading strategy. Remember, it will not be your eternal investment tactic. As time goes by—and you become more seasoned and easily identify patterns—you will start utilizing different strategies.
Should You Day Trade Stocks as a Beginner?
In the end, day trading can be a risky endeavor. You are investing with large sums of capital and, if this becomes your career, your earnings will depend on how well you do in the financial markets.
Put simply, you will need to understand your risk.
Is this a daunting task? Absolutely. At the same time, with enough practice and gathering as much information as you can, you can build a fierce trading arsenal that will produce tremendous results.
Every day trader is still striving to improve by learning as much as they can. The market is constantly evolving, and it is important you evolve with it to be successful.
Day tradingHow Much Does a Pattern Day Trader Make?In the last couple of years, millions more people established brokerage accounts to take advantage of a once-in-a-generation selloff in the financial markets amid the coronavirus pandemic. It was an incredible situation for anyone who did not have exposure to equities because you essentially got in on the ground floor.
Once 23 March 2020 arrived, that elevator started to climb.
Because so many armchair traders made money, they became interested in other opportunities to earn a living, including day trading. Many wonder if unlimited day trading is a profitable venture, particularly if you are day trading with a full-time job.
The easy answer is yes, day traders can make money, but it's not as simple as that. Let's explore if day trading with or without $25,000 is worthwhile.
Percentage of Day Traders That Are Highly Successful
Day traders make up a small number of the global financial markets. According to some estimates, profitable day traders account for 1.6% of the market in an average year, while other reports peg the figure at as much as 4%.
Although they represent a small percentage of the financial markets, profitable day traders account for 12% of all day trading activity. Indeed, they are quite active!
Salary of Successful Day Traders
Of course, when you are researching the numbers behind a professional day trader's salary, you will inevitably come across day traders who make millions. While it is certainly possible, and they do exist, it is safe to say that someone making this claim on TikTok is a grifter.
A 2022 Glassdoor study found that the average day trader annual income was about $74,000, but there was a considerable canyon from the average, with some day traders earning a fortune and many losing a lot of money. Other reports found that the top traders with $10,000 accounts might turn a three percent profit each month, but these are the upper echelon of day traders.
Your average independent day trader might generate $750 in a year. Moreover, studies show that most day traders will be on the losing end with a poor profit-loss ratio.
A 2013 study of Taiwanese day traders concluded: "Less than 1% of the day trader population is able to predictably and reliably earn positive abnormal returns net of fees.”
A June 2021 study of 1,600 Brazilian day traders learned that only 3% made money after a year, and 1.1% earned more than the nation's minimum wage.
Can You Make a Living From Day Trading?
If you execute four or more day trades of the same investment, be it a stock or a commodity, in five business days, you will be labeled as a pattern day trader.
According to PDT rules, you need an account with $25,000 to continue day trading. Of course, it is entirely possible to be an unconventional day trader with less than $25,000, but you need to utilize zero-commission trading platforms with fewer trades. This is otherwise known as the 25k day trading rule.
Many retail investors will day trade futures contracts or engage in day trading leverage, and financial experts purport that you need to put at least $1,000 into the market to make these endeavors worthwhile.
Futures and leverage are not the only day trading strategies to employ, particularly if you cannot endure substantial losses that could wipe out your brokerage account. You can utilize other assets more conservatively and still enjoy capital gains day trading, such as:
StocksETFsCommoditiesForexIndicesCFDsCryptocurrency
Meanwhile, based on the data, here is a list of the expected annual income of day traders by percentile:
90th: $150,00075th: $100,00050th: $80,08125th: $37,50010th: $11,000
How Market Choice Influences Day Trading Profit
Let's face it, the finance industry has presented the trader with many different types of stock trading. It is remarkable how much the sector has changed in the last decade alone. From investing on our mobile phones to using the best trading signal providers on the web, there are a plethora of choices that can both help or hurt your day trading journey.
Of course, market choice is great for institutional and retail investors. You want as many choices as possible, no matter how overwhelming it might seem.
You want the option to use multiple chart websites, stock screeners, and zero-commission platforms. This can only enhance your day trading profit as long as you have the knack for spotting patterns and correctly translating the information to your broader trading strategy.
The Bottom Line: Is Day Trading Worth It?
Few people can turn day trading into a profitable occupation.
Every day, there's an abundance of factors driving the financial markets, from headline news to government reports. It takes studying every component in the global marketplace, in addition to taking advantage of charts, technical analysis, and data.
Plus, even if you are fortunate enough to make a decent living as a day trader, there are still the commissions, fees, paperwork (gasp!), and paying taxes on day trading that can eat into your overall profits.
Indeed, after you first turn $1,000 into $1,400, you will feel like you are on top of the world, but you will also feel deflated when that $1,000 turns into $650. This is crucial to remember as emotion will hurt your day trading career, particularly at the beginning.
Put simply, day trading is worth it if you know what you are doing, you have the capital, and you can be unemotional over everything. Just as long as you understand that the odds are not on your side.
Day tradingDay Trading Options: Best Brokers and Beginner StrategiesIn addition to the growing popularity of stock trading, forex, bonds, and funds, options trading has also become quite popular in recent years. As the name suggests, this style is known for giving traders better diversification options. However, keep in mind that options trading is slightly riskier, albeit more profitable than forex or stock trading. With options trading, you can buy or sell a market instrument on a specific time period and at a specific price. This so-called "option contract" can last as short as a couple of minutes, or potentially last a couple of years. Continue reading to learn more about options trading.
How Much Money Do You Need to Day Trade Options?
Although there are no clear rules that say how much money you need to start day trading options, a good rule of thumb is to never go with more money than you can afford to lose. Still, that is often seen as relatively bland advice, so most experts recommend slowly building up a trading budget. Depending on your income, you could allocate anywhere between 10 to 20% of it towards a “trading jar”, and you can start trading when the amount is big enough to satisfy your goals.
Best Brokers for Day Trading Options
easyMarkets
EasyMarkets is an easy-to-use trading platform designed with a beginner's needs in mind. Throughout our research, we found out that easyMarkets offers quite attractive features like reduced commission rates and minimal requirements for maintaining an account. While easyMarkets may not be the best choice for professional traders who’d like market research details and advanced trading tools, it’s still one of the best options for beginners simply looking to learn the ropes.
Read our easyMarkets review here
AvaTrade
AvaTrade is a widely trusted trading platform with a good selection of trading products to choose from. From our research, we found out that AvaTrade offers convenient tools for beginners, including copy trading, mobile accessibility, and competitive spreads and fees. However, similarly to our previous recommendation, we’d say that intermediate and professional options traders should stick to other platforms.
Read our AvaTrade review here
HYCM
HYCM (Henyep Capital Markets) is a regulated broker available in most of Europe and the US and is a solid choice for option day traders. However, keep in mind that HYCM has slightly higher fees than other trading platforms like easyMarkets, so it’s not the best option for traders who’re looking to invest actively on a daily basis.
Read our HYCM review here
IronFX
As a trading platform, IronFX is an excellent fit for those who are totally new to trading and those who have less knowledge of the market. Unlike some of the other platforms on this list, IronFX also offers a satisfactory amount of tools for advanced traders. Moreover, the trading platform offers flexible account types that make it easy to find a suitable method of day trading. Regularly active traders can also enjoy a personal multi-account manager (PMAM) that offers plenty of convenient tools, like the ability to trade on multiple MetaTrader accounts.
Read our IronFX review here
Best Time of Day for Day Trading Options
Options markets are available from around 9:30 AM to 4 PM ES time. Many experts say that the opening hours, specifically the first 1-2 hours after the market opens, are the best times to day trade. This is because this time period has drastically increased market volatility, making it a lot easier to make a sizable profit.
Most experienced day traders tend to stop trading around 11:30 AM due to the decreased volatility and market volume, making the profits lackluster in comparison to the opening hours.
What to Remember Before You Start Day Trading Options
Although many see it as a way to earn money in your free time, it’s important to remember that day trading is an activity that requires plenty of time and research. While there are no set-in-stone strategies that every day trader should stick to, there are general guidelines that you should follow, like following some of the best trading signal providers. Trading signal providers let other traders follow their trading activities and choose to copy if they wish.
For example, experienced day traders often take advantage of price fluctuations throughout the day or intraday period, and the key to this is having a flexible plan and budget during this time. Like any other type of trading, options trading has its perks, with the main one being flexibility, especially when it comes down to setting your schedule. A good piece of advice would be to research when the particular market gets highly volatile and find a way to fit that period into your schedule.
A general word of advice for any stock market trading strategy is that you shouldn’t trade more than you're ready to lose - meaning that you, as a trader, should be prepared to risk your capital. This is why in-depth market research is essential and should never be overlooked. In addition to having access to a reliable online broker or trading platform, most successful day traders also take the time to research stocks themselves before buying in and logging trades.
Keep in mind that many trading platforms charge high commissions and fees on your profits, and the amount definitely adds up over the long term. Sticking to the reliable trading platforms we’ve included on this list will generally finish most of the hard work for you.
Beginner Day Trading Strategy: Long Puts and Covered Calls
There are two common types of option trades beginners should stick to: calls and puts. These types of trades allow you to sell and buy an option asset respectively, and both are equally as profitable. Beginners should try to stick to long puts and calls before they get into trading with riskier methods.
This essentially means buying or selling contract options with the belief that they will increase or decrease in price while offering the lowest possible risk associated with this method of trading. Though there are other options trading strategies, they should be avoided by beginners until a certain level of comfort and understanding has been reached.
The Bottom Line: Is Day Trading Options Profitable?
Yes, day trading options can definitely be profitable. As the name implies, option day traders enter positions within the market hours and are usually looking to turn a quick profit. This is usually done by entering early on a position, and exiting before a loss happens. By doing this, experienced option traders are regularly profitable, though they are ready to take the time needed to research the market and do the hard work.
Yes, options are good for day-trading. However, keep in mind that options are generally regarded as slightly more complicated than stocks, but their overall way of functioning is quite similar. Consider doing your research and finding day trading stocks that offer exactly what you're looking for.
Day tradingGuide: How to Day Trade Forex Successfully for BeginnersForeign exchange day trading has blossomed in recent years, thanks to the abundance of online trading platforms and the easy user experience on these outlets.
Like day trading stocks, day trading in forex consists of buying and selling currency pairs within a single trading session. So, you will open positions at the start of a trading day and close those same positions the same day. This is done either once or multiple times per day, especially if you spot momentum or small market movements.
This post will break down the basics of forex day trading so that you can start as soon as possible.
What Is Forex Day Trading?
Forex trading is the largest and most actively traded market in the world today. This consists of purchasing one currency and selling another as you trade currency pairs.
For example, you will trade USD/CAD, GBP/JPY, or EUR/CHF. The quote attached to these pairs in the forex market will tell you how many euros are needed to purchase one Swiss franc, for instance.
So, a common query among beginners is how to day trade the forex market. Typically, the three most common tactics are:
Scalping
Taking advantage of short price movements.
Moving Averages
Indicators (simple moving average or exponential moving average) that project the direction of a price movement.
Candlestick Patterns
Investors will enter the market determined by a specific candlestick pattern, like pin bar, triangle, or inside/outside bar.
Now, because forex is regulated by the National Futures Association (NFA), there are not too many official rules you need to be concerned about as you endeavor on forex day trading.
That said, there are several recommendations from industry observers you need to adhere to before executing a GBP/JPY or EUR/CHF trade.
The first is that the minimum capital for forex day trading is $100. But market experts say that starting out with $5,000 is the best way to start.
The second is that 1% to 5% of your overall day trading account should be allocated to foreign exchange.
Remember, forex day trading is typically done during local market hours rather than buying and selling currency pairs all day long. Like a day trader who trades stocks from the opening bell to around 11:30 am, a forex day trader will execute transactions during periods of heavy volatility. Or, if you are a forex day trader situated in a different time zone, you might concentrate on forex trading during New York or London hours.
Best Forex Day Trading Strategies for Beginners
When you forex day trade, you need to assess several market conditions before you venture forward: liquidity, volatility, and volume. Once you know how the market is operating during a particular session, you need to employ one of your day trading strategies to ensure you are trading the right way.
But which forex trading strategy should you include?
These are the three best tactics to employ when you are day trading currency pairs:
1. Swing Trading
Are you noticing short-term trading price patterns? This might be your moment to profit from the up or down movement of a currency pair in intraday trading. Known as swing trading, investors can earn quite a bit of return by taking advantage of the market's price adjustment.
2. Scalping
Scalping is a popular short-term trading strategy because it elicits routine profits based on fast movements in prices. Essentially, a scalping initiative consists of taking smaller profits repeatedly during a session. But you need to establish an exit strategy so you do not miss out on your opportunity to walk away with gains.
3. Money Flow Indicator
Is a currency pair oversold or overbought? Whatever the case may be, a money flow indicator will tell you how the asset is performing by combing through volumes and price movements.
Put simply, a reading of 80 or higher suggests the pair is overbought and a reading of 20 or below highlights the pair is oversold.
How Do Forex Trading and Day Trading Differ?
Forex trading is highly liquid and runs 24/5, meaning that you can execute trades at any time during the week. If this is the case, would a forex trader technically be the same as a day trader? Not exactly.
Regular forex trading could consist of swing trading (holding onto an asset for several days) or long-term investing (holding onto a currency pair for several months). However, forex day trading includes going in and out of forex positions in a single session as you monitor up and down price movements.
Now, the three primary types of forex trading:
Day trading
You do not hold positions overnight and will employ quick trades to turn a profit.
Swing trading
You are holding onto your position for a few sessions as you wait for current events, news reports, or political developments to impact the currency pair in your favor.
Position trading
You have a strategy and you are speculating, based on fundamental analysis and research, on positive long-term price movements of a particular currency pair.
Pros and Cons of Day Trading
Pros
Plenty of volatilityInstant resultsReduced trading overhead
Cons
A risk of overtrading in forexGreater odds of losing more trades than winningAddiction to day trading
Pros and Cons of Swing Trading
Pros
Part-time trading is popularTime commitment can be minimal based on your scheduleYour capital is not frozen for too long
Cons
You will face the risk of overnight and weekly risksTiming the market is a challengeTrading costs could add upRisk of missing out on additional gains
Pros and Cons of Position Trading
Pros
You will miss the volatilityGains could be greater with a specific price targetBuy the dipsAvoid the stress of day and swing tradingZero time needed outside of your research
Cons
A minor drop could lead to a full bear marketA winning trade could switch to a losing alternative
How to Find the Best Broker
So, how do you find the best broker for your trading needs anyway?
The most superior way to come across the top forex day trading brokers is by listing important criteria and what attributes matter to you. For example, forex day traders will generally home in on the lowest commissions and fees and a user-friendly interface. Many websites claim to offer these features to users, but the reviews suggest that IronFx, Fortrade, and easyMarkets provide these tools to clients.
How to Start Day Trading Forex Successfully
The best way to trade forex is by arming yourself with the tools, resources, and knowledge to successfully execute trades. This consists of following trends, knowing market times, and monitoring trading charts.
That said, let's become acquainted with these things.
A trend showcases the movement of a price in a specific direction over a period. These trends can be long- or short-term and upward, downward, or sideways.
The forex market is open 24 hours a day, five days a week, worldwide. That said, since most forex traders will trade between the hours of 8 am and 4 pm local time, investors and analysts typically view this period as when the market opens and closes.
Terms You'll Need to Know
If you come across a superb research note, or you have found a great community to monitor, you may be confused by some of the terms. To help you out, here are a few terms to become familiar with:
PIP
The percentage in point, or PIP, is the fourth decimal on a price quote for a currency pair.
Bid/Ask Price
The bid is the price a trader wants to sell a currency pair. The ask is the price a trader will buy a currency pair.
Lot
The size of the trade you will open (one lot is equal to 100,000 units).
Leverage
Money that is borrowed from a broker to open a position with an immense contract size.
Long/Short
Long is when you anticipate a currency to appreciate, while short is when you expect the price of a currency to fall.
Charts to Learn
One thing you notice when you establish a tailored forex day trading system is that you will come across a plethora of different charts.
For beginners, here are the top three charts you can utilize:
Line Charts
These charts generally display the closing price and are quite popular in business media with how easy they are to peruse.
Bar Charts
These charts are a little more advanced because they are used to spot key levels by identifying ups and downs, highs and lows, and opening and closing prices.
Candlestick Charts
If you are in forex, the candlestick is your best friend, since it lists the opening and closing prices (body) and high and low prices (wicks) for a specified period.
Step-By-Step Guide for Day Trading Forex
With all this information, here is also a step-by-step breakdown on how to start day trading forex:
Learn
Equip yourself with everything you need to know about forex and day trading, from strategies to brokerage accounts.
Create a brokerage account
You will need to have a brokerage account to begin day trading forex. You need to find one with the best spreads, lowest fees, and best user experience.
Monitor
If you are actively trading forex, you need to monitor the numbers, the news, broader markets, and the rest of the world that could impact currency pairs.
Strategy
Before picking and choosing what forex pairs to trade, you must have a trading strategy to maximize your profits. Without one, you will be going into your sessions blind and without a cane.
Emotion
It is normal to feel emotional about forex day trading. This is your money and your livelihood could accelerate or break down in a single session. Ultimately, it is imperative to check your emotion at the door when you are buying, selling, and trading forex.
Is Day Trading Forex Profitable?
How much money do you need to day trade forex?
These are some of the most common questions asked, and they are important to determine before you launch your adventure of day trading in forex.
Ultimately, day trading will only be profitable if you stick to it in the long run and take it seriously by doing your due diligence and research. As many financial experts will tell you, forex day trading is a job that requires hours of research and trading.
Now, the market needs to do its part, too. This means that you need to spot particular conditions.
For example, if there is a breakout (price movement that veers away from a defined support or resistance level), you need to take advantage of this development. Moreover, as time goes by and you develop a sense of how the market will move, you will eventually know when to buy the rumor and sell the news.
How to Ensure Success With Forex Trading
Indeed, there are many factors for being successful in forex trading. You need to study charts, identify patterns, keep track of the pip movements, and monitor the news headlines as part of your forex day trading system. By even abandoning one of these mechanisms, you could potentially lose out on a profitable trade.
In the end, there is not just one aspect to make money from forex trading. It is a house of different measures.
Now that you know the basics of forex day trading, you are ready for the next step. Continue with our post about the Best Forex Day Trading Strategies for Beginners.
Day tradingBest Forex Day Trading Strategies for BeginnersAlso known as intraday trading, day trading refers to buying and selling a forex (foreign exchange) asset (currency pairs) within one trading day. Unlike long-term investing, day trades are relatively short purchases & sells where the positions are held briefly, usually a couple of minutes or hours.
Keep in mind that day trading is not a forex market strategy - instead, it’s a specific approach to any market that requires significantly more research and time. This means that forex day trading can have plenty of unique strategies, and many of them are specifically geared towards beginners.
Can Anyone Begin Day Trading?
Anyone can start day trading, but not everyone will succeed. Although day trading doesn’t require any formal qualifications, those that have done more research and dedicated more time will have significantly more success.
The first step to trading forex is to decide on a broker, and there are many to choose from. For more advice on this topic, read our post about the Top Forex Brokers.
Advice and Strategies for Day Trading Forex
Trend
Being a relatively simple forex day trading strategy, trend trading is a style that works on capturing the asset’s current momentum. For example, if the price of a currency pair has a trend of going upward (increasing in price), the strategy is to enter a long position and hold it for a profit. Trend trading is often regarded as the best forex day trading strategy as it’s incredibly beginner-friendly and consistent.
Swing
Unlike trend trading, swing trading requires you, the trader, to identify the potential of a “swing” (price change) occurring. Although the strategy is beginner-friendly, most experts state that it’s not a strategy day traders should look into because it occasionally requires holding a position overnight, dismissing the entire approach of day trading.
Scalping
Scalping is one of the safest and most risk-free strategies a beginner can look into. Put simply, scalping is the action of profiting by opening a position when a minuscule price change occurs (usually less than 1%) and then selling it for a small profit. Still, keep in mind that scalping is a dynamic approach to day trading, and often requires the use of indicators, predictions, and research.
Mean Reversion
Contrary to the previous strategy, mean reversion is based on profiting from an extreme change in the price of a currency pair. Of course, the position is opened on the premise that the asset will return to its previous price. As an approach, mean reversion is usually best for intermediate traders as it’s riskier than some of the other strategies mentioned above.
Money Flow
Also known as the MF index, “money flow” is an analysis tool that uses the current price and volume of an asset to identify if it’s being overbought or oversold. Most experts recommend that a beginner avoid the MFI approach as it’s geared towards intermediate and advanced traders. Still, keep in mind that it can be an incredibly profitable forex day trading strategy.
The Difference Between Forex and Stocks for Day Trading
The day trading approach usually stays consistent regardless of the asset you plan on trading, though there are slight differences depending on the asset you’d want to trade. For example, forex trading is almost always more volatile than stock trading. This is because the market is primarily dependent on political and socio-economic events, and the patterns are difficult to predict due to the market being open 24/5.
On the other hand, day trading stocks is more predictable and significantly more stable. However, keep in mind that the stock market is less liquid than the currency exchange market. This means that there’s an overall smaller flow of money, meaning that the profits are not as big when compared to forex.
What Can Make Day Trading Difficult?
Many things could make a beginner’s journey into day trading difficult, though underestimating the risk that comes with day trading is usually the biggest one. It’s important to remember that being successful in day trading requires plenty of time, research, and education, whether formal or informal. Successful day traders earn money consistently, though it’s not something you can expect to happen overnight.
Conclusion
All in all, day trading is an interesting approach to the forex and stock market. It’s widely regarded as one of the most profitable trading practices but also the most time-consuming. Since there is no secret to becoming a successful day trader, you must do the research and invest the time. There is no day trading strategy that always works for forex, but there’s always something you can do to better your skills as a day trader. There are many beginner-friendly materials and investment books you can go for, but nothing will fully guarantee your success.
Day tradingUsing Platforms and Brokers for Day TradingWith the stock and forex markets becoming more accessible than ever, traders and investors have come up with ways to earn money passively and actively. One of these activities is called “day trading,” where a trader buys and sells an asset within a couple of hours rather than holding the asset long-term.
Of course, day trading is not new, as it has been an activity many traders have done since the inception of the stock market. However, with the vast range of internet trading platforms, it has become easier than ever to day trade, but similarly more terrifying with the rising speculation regarding the security and reliability of all the different platforms.
This is why choosing a reliable trading platform is essential, and we’ll elaborate on how to do so below.
What Is Day Trading?
Day trading (also known as intraday trading) is the activity of buying and selling an asset within a single trading day - usually within a couple of hours. By itself, day trading doesn’t differ too much from any other type of trading, except that the buying and selling of assets are strictly limited to a couple of hours.
Of course, day trading has its pros and cons compared to other market approaches. Firstly, it has often proven to be a more profitable yet riskier approach when compared to other forms of trading. Unlike long-term trading or investing, day trading requires significantly more time, research, and energy.
You also have to adhere to the pattern day trader (PDT) rule that determines what criteria you must meet to be eligible for day trading.
Should You Use a Stockbroker for Day Trading?
Many day traders stick to stockbrokers for their day-to-day purchasing and selling of assets. Although most day trades are performed on forex assets, choosing a solid stock broker will give you the option to buy and sell other instruments, like shares, precious metals, indices, treasuries, and even agricultural products. So, it’s safe to assume that a stockbroker is a solid choice.
Are There Preferred Sites to Day Trade From?
Even though there is no definitive "best site for day trading," sticking to reliable brokers will always do the trick. You’ll rarely hear a trader of any level that has a complaint from a reliable trading brokerage like Fortrade, AvaTrade, or easyMarkets. As long as you stick to a safe and well-established platform, you’ll have no issues trading.
What Is a Trading Platform?
Nowadays, the two terms - “trading platform” and “stockbroker” get used interchangeably, although there is a small difference. A stockbroker is an intermediary who lists the companies and assets where you can buy from.
On the other hand, the trading platform is the place (nowadays a website or app) where you can purchase or sell the asset you own. The reliable brokers we, at Broker Reviews, have listed on our website have their own trading platforms, so there’s no need for you to research and distinguish between a trading platform and a broker.
Read our reviews of the best brokers here.
How Is Safety Ensured at a Trading Platform?
With the rising number of trading platforms, there has also been a rise of scams among beginners traders and professionals alike. As such, many question themselves on where to day trade and how to make the right choice. To make sure that your funds, as well as personal and financial information, are safe when trading, you should stick to some of the reliable platforms we’ve listed here on our website.
Reliable trading platforms have been proven to be reliable by relevant licensing bodies like the Cyprus Securities and Exchange Commission (CySEC) or the Australian Securities and Investments Commission (ASIC). If you’re new to trading, stick to the top social trading platforms for beginners, and you’ll never go wrong.
Platform Advice for Beginner and Intermediate Traders
Beginners
Regardless of your experience level, the things you should look for in a trading platform remain more or less the same. However, there are a few things beginners should look into before investing their cash in a platform. This means checking out at least one trading platform review and figuring out all the details.
For starters, going with a platform that has a well-designed and intuitive user interface will save a newbie a lot of trouble; it’s also probably the best place to day trade at. Feeling lost in navigating the website, in addition to being overwhelmed by a whole new world, will make every beginner frightened. Sticking to some of our choices for the best online brokers will also go a long way.
Intermediates
Once you’ve gotten the hang of the stock market’s terms and feel comfortable with the charts in front of you, you can consider yourself an intermediate trader. Thus, you can slightly change up the strict criteria you had as a beginner to broaden your horizon when looking at day trading brokers.
For example, intermediate traders usually don’t have to stick to a trading platform with educational material. If you’ve gotten the hang of the stock and forex markets, all that’s left is for you to develop your own tactics and strategies. Consider sticking to a trading platform where there’s a vast abundance of trading instruments, including currency pairs, stocks, cryptos, indices, and more.
Conclusion
We’re well aware that many things come to mind when you think of the term 'day trading,' especially as a beginner. The entire world of buying and selling assets on the market may appear daunting at first sight if it’s not something you’ve dabbled with in the past, and a good trading platform is the first step in the right direction.
However, reliable online trading platforms are important to intermediate and advanced traders as well. The best brokerages for day trading will have everything you’re looking for, including a vast selection of trading instruments and convenient market analysis tools.
Day tradingThe PDT Rule: Why You Need 25k to Day TradeThe early days of the coronavirus pandemic led to a tsunami of new investors, allowing young traders to buy one of the sharpest dips since the 2008-2009 financial crisis.
Be it Robinhood or Wealthsimple, investors hopped on the trading bandwagon and got their hands on stocks, exchange-traded funds (ETFs), and commodities at rock-bottom rates.
This once-in-a-generation event also sparked a wave of day traders. But while everyone considers themselves a genius in a bull market, the pattern day trader, particularly the typical inexperienced one, could be in store for quite the ride.
So, do you want to learn day trading to take advantage of those social trading signals? We have the basics you should know about this investment journey.
Is Day Trading Illegal?
When novice traders get involved in the world of finance, many questions will pop up, including if day trading is illegal.
So, is it? Simple answer: No.
Day trading essentially refers to buying, selling, and buying the same investment in the same session, according to the Financial Industry Regulatory Authority (FINRA) and New York Stock Exchange (NYSE).
The Pattern Day Trading Rule Explained
The next step in this journey of unlimited day trading is the pattern day trader, also known as PDT.
What is it?
If you make four or more day trades of the same security in a period of five business days in a margin account, this is labeled as pattern day trading. So, a pattern day trader rule example would be executing a trade on Monday, Tuesday, and Wednesday, which then means you can only make one more on the following Monday.
In 2001, FINRA implemented PDT that also contains a day trading 25k rule and a series of other special rules. It was later approved by the U.S. Securities and Exchange Commission (SEC).
In this environment of mobile trading, zero-commission brokerage firms, and astronomical liquidity across the global financial markets, is PDT an outdated regulation?
In order to determine the efficacy of the minimum equity requirement for pattern day trader, it is important to understand why this rule was implemented.
Federal regulators introduced the PDT rule to prevent investors from being too over-leveraged and to ensure there was enough capital in their trading accounts to ensure they were shielded from the consequences of margin calls. In this market with access to cheap credit, many proponents of day trading rules over 25k say it is more needed than ever before.
What Happens if You Break the Pattern Day Trader Rule?
If you are caught skirting day trading rules under 25k on, let's say eToro or TD Ameritrade, your account will get flagged.
Depending on your investments and account type, you may be given a pass. However, if you do it again, you will likely be faced with a margin call. The brokerage firm will extend you five business days to meet the call. Should you fail to abide by the margin call, you will be slapped with a 90-day cash restriction.
Overall, your trading will be restricted in one form or another.
It should also be noted that, even if you are not day trading regularly, your broker will continue to identify you as a day trader, until it no longer has any suspicion that you trade securities regularly during a session.
In the end, it is critical to become familiar with the penny stock day trading rules or how to participate in unlimited day trading.
Which Stocks and Markets Follow the PDT Rule
Essentially, nearly every corner of the U.S. financial market abides by the pattern day trader rule. From foreign exchange to cryptocurrency to equities, it can be challenging to avoid PDT, especially since companies are diligent in their customers who day trade.
Can You Day Trade Without 25k?
So, is there any possible way of day trading with no PDT restrictions?
Yes, there are several measures you can employ to ensure that you can day trade stocks without barriers.
The common strategy that investors make is tapping foreign markets that do not possess this $25,000 day trading rule.
The other mechanism is by opening multiple brokerage accounts because you can attain three day trades for every rolling five-business-day period. So, for instance, you could start day trading in the UK or Australia.
A cash account is also simple enough because you can engage in unlimited day trading without any minimum or maximum limits. This consists of trading with only settled cash.
For example, if you have initial day trading capital worth $5,000 to invest, and you have purchased $3,000 in stock, you can only trade with $2,000.
You want to do what is best for your wallet. You may ask, "Is day trading profitable?" It can be if you know what you are doing. While rules, regulations, and restrictions could serve as hurdles to overcome, you can overcome them!
Day tradingHow to Day Trade Without 25kIf you have started to learn day trading and become interested in this investment tactic, you have likely come across the $25,000 day trade rule.
According to federal regulations' pattern day trader (PDT) rule, these investors must maintain minimum equity of $25,000 during any trading session that the investor day trades.
Now, a day trader is defined as someone who executes at least three intraday traders on a U.S. securities exchange within five days.
So, does this mean you cannot day trade without $25,000? While it might be challenging to skirt the myriad of pattern day trader restrictions, it is certainly possible to begin day trading with $100. But how? Let's explore!
Best Brokers for Day Trading Without 25k
While it is correct that all brokerage firms are required to report clients who make day trades or partake in unlimited day trading, there are ways to skirt this system, such as maintaining more than one trading account, using the trading hours to your advantage, and participating in swing trading.
Ultimately, when you are employing day trading loopholes, you will want zero-commission platforms that are not part of the major Wall Street brokers.
So, that said, here are the best trading platforms for beginners to initiate day trading with less than 25k:
Robinhood
This is a zero-commission trading app that possesses a wide variety of products and services that can help you complete buy and sell orders on a day trading account with less than $25,000.
Wealthsimple (Canada)
If you are in Canada, you should definitely consider installing the Wealthsimple app on your mobile phone and begin swing trading on a zero-commission account. For now, it has the bare-bones account features, but it keeps growing. Although it is not specifically designed as one, it can be one of the best penny stock brokers.
HYCM
You can always avoid penny stock day trading rules or options day trading rules by participating in foreign markets. This can be done by signing up for global venues, including Henyep Capital Markets (HYCM).
IC Markets
This is a terrific online retail broker that provides access to CFDs over stocks, bonds, commodities, and forex in equity markets worldwide, including Asia, Europe, and the Middle East.
Best Markets for Day Trading Without 25k
When you are day trading without $25,000, there are a few markets you should home in on for your investment journey.
Here is a couple you should consider:
Forex
The foreign exchange market works 24 hours a day during the week, with investors trading many different currency pairs, such as the USD/CAD, the GBP/JPY, or the EUR/CHF. A lot of brokers have an account deposit minimum of around $500, so if the forex market leverage is 50:1 ($25,000 in total), you could implement day trading leverage into your overall strategy.
Futures
In the futures market, you could see gains or losses pile up quickly, giving you an adrenaline rush or dread. Indeed, the futures market consists of trading stock index futures or commodities, beginning with capital as little as $500. A single point could be worth as much as $50, meaning that you could achieve that $25,000 threshold by the end of the session.
Other Strategies for Day Trading Without 25K
Aside from trading certain markets, there are various day trading loops you could exploit to ensure that you can navigate your way through the financial arena without being penalized.
Here are some tactics you should consider inserting into your arsenal of tricks:
Three in Five
This measure consists of executing only three day trades in a five-day period.
The primary benefit of this tactic is that you will avoid being penalized by the PDT rule. The disadvantage, however, is that you will need to be selective in trade signals and you will be unable to take full advantage of a proven strategy.
Make Swing Trades That Last Longer
You see upward movement in a share and you buy into the wave. You initiate a position, but rather sell a few hours later or even the next session, you will need to wait a little bit longer to refrain from being designed as a day trader.
This could be a positive route to take since you could extend any gains if the security has some more legs. Unfortunately, the con is that you risk losing any profit you may have had with different price points. The other negative is that you might have gotten in on the swing trade too late, possibly missing out on most of the rally.
Create Day Trading Accounts at Multiple Brokers
You have a day trading account at more than one broker. By doing this, you can complete six day trades in a five-day period. Clearly, you can bypass the PDR signal, but the consequence is that you will have limited capital to employ and your income would not be as immense with multiple accounts.
Launching a Cash Account
You can day trade with a cash account. This means you can make as many trades you want with any amount of money. The only cash is that these funds must be settled. For example, if you have $1,000 in your cash, and you have made a day trade of $300, you can only trade with $700 until the rest is settled.
Put simply, you cannot day trade on margin.
The obvious advantage to this is that you have unlimited day trades and you can buy and sell with a small dollar amount. But if you have gotten serious about investing, the drawback is that you cannot go big on your trades as you will only be able to trade with settled cash.
Mistakes to Watch Out for When Day Trading Without 25K
Indeed, there are many mistakes you can make, whether you are day trading with or without $25,000. Do you want to know what these are? Here are a few things to remember:
Day trade what you can afford to lose, from $1,000 to $25,000.Possess knowledge of your trading systems so that you can move in and out of positions and accounts.Do not size your trades too big based on FOMO (fear of missing out).Avoid trying to rationalize staying with a position longer than you intend.
The Bottom Line: Is Day Trading Under 25K Worth It?
In the end, it is certainly worth it to day trade with less than $25,000 in your account. Indeed, playing "small ball" can certainly afford you many opportunities to earn some extra cash or potentially build an account where there is the chance to have $25,000 to officially day trade. As long as you utilize the methods and do your due diligence, you can be confident that day trading is right for you.