How To Become A Day Trader In Australia: A Beginner's Guide

 

Do you have self-discipline, emotional control, and analytical thinking skills? If yes, consider pursuing a day trading career in Australia.

 

Day traders buy and sell financial instruments like shares, indices, and cryptocurrency, profiting from short-term price fluctuations.

 

Our blog provides valuable insights into the necessary skills, steps to become a day trader, the best trading platforms, day trading strategies, and more.

 

If you don't have a trading account yet, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

 

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

 

eToro offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders.

 

 

 

1. What Is Day Trading in Australia?

 

Day trading involves trading financial instruments to close off positions by the end of the day’s trading session to book profits from price movements.

 

This strategy mitigates risks associated with carrying overnight positions when the market is highly volatile. Day trading is a full-time daily job wherein traders must study market movements closely and form quick decisions.

 

Intra-day trading requires focus, fast decisions, emotional control, and continuous monitoring of the price movements on the charts to enter and exit the positions at the right time.

 

2. What Can You Day Trade In Australia?

 

Choosing a market-to-day trade comes down to what you can afford, where your interests lie, and how much time you want to invest in trading.

 

A day trader can choose to trade in any of the popular day trading markets:

 

• Stocks include physical stocks in companies, regular shares, exchange-traded funds (ETFs), and futures.

• Digital currencies or Cryptocurrencies (Crypto) like Bitcoin, Litecoin, Ethereum and Ripple. 

• Index funds are low-risk investment portfolios of shares that match the pace of the stock market instead of outperforming it. The most popular way to trade in index funds is through exchange-traded funds (ETFs) on the Australian Securities Exchange (ASX). As index funds are slow financial vehicles, few traders view them as a day trading option. They are a good option for long-term investing plans.

 

 

 

 

3. How To Start Day Trading in Australia?

 

If you do decide that this way of investing is the right choice for you after considering the level of risk it involves, here is a quick summary of how you can start day trading in Australia:

 

1. Research the markets you can day trade in Australia and learn how they work. 

2. Decide on a trading strategy.

3. Practice your desired strategy (This blog also discusses day trading strategies).

4. The best way is to practice with a demo brokerage account. eToro offers a demo account. To create an account, click here. Alternatively, a share market game (like the ASX game) is a good option before you trade with real money.

5. After practising, open a stock trading account to begin trading on live markets.

6. Keep up with trends and financial markets.

 

 

 

4. Steps To Become A Day Trader In Australia

If you are serious about making a day trading career, then here is the pathway to help you accomplish your career goal:

 

 

Step 1: Find A Day Trading Platform (Broker)

 

The first step is to find a suitable trading platform that enables you to execute trades at a minimal cost.

 

If you don't have a trading account yet, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

 

eToro AUS Capital Limited AFSL 491139. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

 

The trading platform also offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders.

 

You can follow other successful traders and copy their strategies for a successful start. The platform is perfect for beginner and advanced traders with its easy-to-use interface.
 

 

eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Social trading. eToro does not approve or endorse any of the trading accounts customers may choose to copy or follow. Assets held in your name. Capital at risk. See PDS and TMD

 

A day trader can take unlimited trades in a day, provided he pays the trading charge for each executed transaction, which depends on each trading platform. That's why brokerage is an essential factor when choosing a broker.

 

When choosing a broker in Australia, you must assess certain factors for selecting the right broker for your trading requirements:
 

• Reputation and Customer Base

• Minimum deposit

• Type of supported platforms (web/tablet/mobile)

• Permitted financial instruments to trade

• Annual maintenance fee

• Leverage and Margin

• The efficiency of their service, such as their software doesn’t hang due to server overload etc.

• Facility to Invest in US Stocks

• Type and Efficiency of Customer Service (Live chat, Phone and Email support)

• Permitted withdrawal modes and charges

 

When you are done with the research, now is the time to create an account with a day trading platform to start trading.

 

If you want to proceed with eToro, you can create an account here.

 

eToro AUS Capital Limited AFSL 491139. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

 

 

Step 2: Learn About Financial Markets And ASX

 

A lack of trading knowledge can lead to irrecoverable losses, which is why aspiring traders must be familiar with trading the selected financial instruments.
 

Begin by building a good knowledge base about financial markets. Get complete knowledge of market trends, price market action, volatility ratio, market phase (bull run or bear run), inflation, the impact of news on the market, and more.

 

Learn about the ASX exchange, such as permitted tradable instruments, trading hours, best trading time for intraday, margin requirements, leverage, exchange holidays, and more.

 

Step 3: Learn Technical Analysis

 

Understand the type of instruments you wish to trade as a day trader to take your learning a little further.

 

Study how to do technical analysis of financial instruments using indicators such as candle patterns, chart patterns, oscillators, Bollinger bands, volatility, momentum, VWAP, and the Fibonacci series.

 

For traders serious about their profession, they should get one-to-one coaching from an experienced trader. It will help them learn trading strategies and tools that suit their career aspirations.

 

You could sign up with eToro, the most prominent social online trading platform in Australia and worldwide. The broker allows following other traders to learn their strategies.

 

(eToro AUS Capital Limited AFSL 491139. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.)

 

You can also find online resources for introductory knowledge about trading, such as podcasts, blogs, books, e-books, YouTube videos, online day trading courses, PDF guides, seminars, message boards, forums, and newsletters.

 

 

Step 4: Arrange Sufficient Capital

 

You need a certain amount of money to start trading in the financial market. No one makes consistently profitable trades. Intermittent losses are a part of the day trading profession.

Besides the initial investment, you also need an adequate cushion of capital so that even after deducting the losses, you are left with sufficient money to take more trades.

 

Step 5: Learn And Practice Day Trading Strategies

 

A beginner trader can’t master every intraday trading strategy. The correct course is to pick two to three time-tested strategies. Practice implementing these strategies by taking paper trades (that don’t involve money). We will discuss day trading strategies later in this blog.

 

Once you gain proficiency in working on them, learn a few more strategies and practice them too. This way, you will get good hands-on experience using day trading strategies. It will make you confident and prepare you to take actual trades with real money.

 

Step 6: Learn About Risk Management

 

Capital management and strict stop losses are two ways to manage your risk while trading.

 

Firstly, you should avoid putting all your money into one trade. If that stock/sector doesn’t perform for whatever reason, you will either have to book your loss or wait until you achieve your target price.

 

Most people don't risk more than 3% of their capital per trade when investing and trading in the financial market. 

 

 

The next method is to put a stop loss that limits your losses once the price of your security drops. Based on your risk/reward ratio, you can define your stop-loss price so that if your security price reaches that value, the order gets automatically executed, and you exit the trade.

 

Step 7: Form A Trading Plan

 

Now that you know about day trading strategies and risk management, you should start making a trading plan you will follow in each trade. 

 

Your trading plan should include the following things:

 

• How much percentage of capital is to use for each trade?

• How much leverage to use for each trade

• How many trades to execute per day?

• Type of financial instruments to trade

• Frequency to place trades

• What time to trade in a day

• Risk to Reward ratio

• How to use the entry/exit strategy?

 

Step 8: Learn How To Use The Day Trading Platform

 

After creating an account with a broker, learn how to place buy and sell orders, place stop-losses, view charts, and withdraw funds.

 

Once you have reached this step, you can start trading on the Australian Stock Exchange (ASX).

 

If you don't have a trading account yet, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

 

(eToro AUS Capital Limited AFSL 491139. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.)

 

 

Step 9: Start Day Trading

 

Beginner traders mostly start with a demo trading account that involves fake money to test their skills. Once they become proficient and gain confidence, they start trading with real or minimal funds to avoid losing a lot.

 

Others first follow experienced traders via copy trading. Some trading platforms, such as eToro, offer this feature for beginners to watch and analyse people with experience before they start trading themselves.

 

However, always remember day trading comes with the risk of losing all your capital. Be cautious, always seek guidance and protect your money.

 

A risk management plan that includes setting stop losses is essential to minimise capital loss.

 

 

eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Social trading. eToro does not approve or endorse any of the trading accounts customers may choose to copy or follow. Assets held in your name. Capital at risk. See PDS and TMD.

 

 

5. What Skills Do You Need To Be A Day Trader In Australia?

 

Day trading is not for everyone. It is a place reserved for only learned, mature, and emotionally intense people.

 

Traders often enter the market hoping to make quick money and like it when the market is in the bull phase.

 

However, they fail to survive when the market transits into a bear phase. It drives the day traders to exit the market in fear and book hefty losses.

 

It is why only a few per cent of people manage to make money in the market. It takes a lot of patience, perseverance, and emotional control to stay in the market even when the market is falling.

 

So, here we are with a list of desirable skills that can help you make a long-term career in day trading:

 

Good Knowledge of Mathematics

 

A day trader must do a lot of calculations to understand the market and arrive at the right trading strategy.

 

Mathematics skills greatly help to analyze price movements, moving averages, volumes, and key ratios and study balance sheets and income statements of companies that involve large numbers of sales, profits, liabilities, assets, and more.

 

 

Patience and Emotional balance

 

You can’t trade on all days. A day without trade is also a trade. The temptation to make quick money can lead you to make wrong decisions where you could lose instead of making profits.

 

A good trader should resist his temptation/greed and be willing to wait to find the perfect chart pattern/ strategic signals to enter a trade.

 

Risk-Taking Abilities And Risk Management Skills

 

Any investment is subjected to market fluctuations and has some risk. Day trading is one such investment.

 

Despite implementing the appropriate trading strategy, you may start incurring losses. It is when you need a proper risk management strategy in place. Stop losses will help you trim losses and stay in the game.
 

A day trader must know that the market runs on people's sentiments, which are fast to react to anything they disagree with or dislike. A market in an upward trend may suddenly start a downward trend in response to sudden news (for example, Covid 19, annual budget).

 

Thus, knowledge and implementation of effective risk management is also an essential day trader skill.

 

 

Courage and Acceptance

 

Are you surprised that you need the courage to become a day trader? Not every trade will make you a winner. The stock market is unpredictable, and sometimes your trades may be wrong.

 

A good trader accepts his occasional failure and stays firm even when he has to exit a position with a small loss.

 

A Good Understanding of The Market

You should have spent some time in the stock market and know how it functions. A good understanding of the economy, indexes, industries, and financial instruments, is desirable to make a start.

 

Interest In Following The Market

Your interest in trading will lead you to track the market, including national and global markets, factors like a crisis that impacts them, inflation, trends, charts, economic data, and quarterly results at every moment. All this is required to decide and plan a trade.

 

Discipline

 

Discipline is an indispensable virtue of any successful trader. You need to follow your rules and stick to them at all times.

 

In trading, discipline implies defining the right exit point based on realistic profit targets and exiting the trade correctly once you achieve it.

 

Many top-day traders in Australia recommend placing a stop-loss order when initiating a trade. This is a good practice because traders automatically exit the position after achieving decent profits without craving more.

 

 

6. Qualifications To Become A Day Trader In Australia

 

You do not need to complete any formal qualifications to qualify and work as a day trader in Australia.

 

Given day trading comes with a high degree of uncertainty and risks, you must master intraday strategies to determine precise entry and exit levels in a financial instrument to book profits and come out of the trade when you achieve the target.

 

Along with hard and soft skills, a day trader must have access to a functional trading platform and have adequate starting capital to initialize trades.

 

 

 

7. Day Trading Strategies For Beginners in Australia

 

Many people think that 'day trading' itself is a strategy, which is wrong. The term only specifies that you don't keep a trade open overnight - it's simply a trading style. 

 

Below are a few valuable strategies that beginners can use for day trading:

 

 

Trend Trading

 

 

Trend traders study the direction of asset prices and then buy or sell depending on the direction of the trend.

 

If the trend is upward, with prices making a series of higher highs, then traders take a long position and buy the asset. If the movement is downwards, with prices making lower lows, traders take a short position and sell.

 

Day traders don't just use trend trading since you can keep your position open if the trend continues positively. However, if you strictly follow intra-day trading, close it before the day ends.

 

 

Swing Trading

 

 

Swing trading attempts to capture short-to medium-term returns in any financial instrument over a few days to weeks. Traders use technical analysis to look for new trading opportunities.

 

It assumes that prices never go in one direction in a trend and take advantage of short-term price movements. Swing traders try to profit from the up-and-down movements within days and weeks.

 

While trend traders take advantage of long-term market trends, swing traders are more interested in minor trend reversals. They try to spot these reversals quickly and trade to profit from smaller market moves.

 

 

Mean Reversion

 

 

Mean reversion is the theory that prices and other value measures, such as P/E ratios (price-to-earnings), eventually return to their historical norm.

 

This strategy uses technical analysis, such as moving averages, to detect assets whose recent performance differs considerably from their historical average. Traders following the 'mean reversion' strategy take advantage of an asset returning to its typical trajectory.

 

Mean reversion is a financial theory speculating that asset prices and historical returns will eventually revert to their long-term mean or average price levels.

 

 

Money Flows

 

 

Traders use the money flow indicator to assess future price movements based on demand and supply. 

 

Money Flow calculates the standard price multiplied by the trading volume. It is the core of the Money Flow Index (MFI) indicator. Money Flow is not an indicator but a function to construct other indicators.

 

The indicator signals when an asset is oversold or overbought. It uses volume and price rather than solely the price of the asset.

 

It determines whether the money flow is positive or negative by comparing the total trades from the previous day to the current day.

 

If the indicator is 80 or more, it signals overbought conditions, and the trader might consider selling their position. In contrast, a reading of 20 or below indicates oversold market conditions and signals a buy.

 

 

Momentum Trading

 

Traders seize opportunities in stocks experiencing upward price surges when employing momentum trading.

 

Identifying these momentum-driven stocks can be challenging, but when implementing a momentum trading strategy, consider seeking stocks with the following attributes:

 

1. A significant catalyst triggers a substantial price shift.

2. Price movements of at least 30% or more.

3. A focus on smaller stocks that tend to trade more rapidly due to their limited number of outstanding shares; ideally, the float should be less than 100 million shares.

 

 

Breakout Trading

 

Breakout trading happens when a stock's price goes above a certain level where it used to struggle to rise.

 

Usually, breakout trades are better when many people buy and sell the stock. It's more likely that the price will stay high.

 

If only a few people are trading the stock when it breaks out, it usually falls back down instead of staying high. This can make it harder to make money.

 

After the price exceeds the old resistance level, the stock usually decreases slightly before going up again. This happens because more people are trying to sell the stock than people are trying to buy it, which stops the price from increasing even more.

 

Pullback Trading Strategy

 

To use the pullback strategy, start by finding a stock or ETF with a clear trend.

 

Watch this trend until the price goes down from that trend. If the trend increases, when the price dips down (a pullback), it's a good time for day traders to buy.

 

Look for an uptrend with at least two high-price movements before the pullback occurs. If you're thinking of shorting the stock (betting it will go down), you'd want to see two decreasing prices in a row.

 

 

News Trading

 

Day traders can take advantage of current business news, seizing opportunities driven by the day's top stories.

When negative news surfaces, traders may consider shorting a stock by borrowing shares from an investment firm and subsequently selling these borrowed shares.

 

Suppose the stock price follows the expected decline. In that case, traders can repurchase the shares at a lower price, reaping profits after accounting for commissions.

 

Conversely, in positive news, traders might opt to "go long," purchasing the stock outright and selling the shares once the price has appreciated.

 

 

 

8. Why Should You Become A Day Trader In Australia?

 

 

Here are the top reasons why day trading makes a fabulous career in Australia:

 

Global Financial Market

 

Australia, especially Sydney, has been a global finance centre. The country boasts a flourishing financial market with over 2100 publicly traded companies.

 

Established in 1987, the Australian Security Exchange is the stock market in Australia and the 10th largest stock exchange in the world. It trades in officially listed government issues, such as currency, stocks, stock indexes, futures, traded options, agricultural products, metals, silver, and gold.

 

The Australian Securities and Investment Commission is an official regulatory structure that regulates the ASX stock exchange. The commission enforces laws to protect traders' interests.

 

Furthermore, the country has several online brokerage firms that enable people to access local and international trading instruments.

 

Evolving Economy

The evolving economy and growing customer base make Australia an ideal destination to pursue a day trading career. Moreover, it offers plenty of financial and business opportunities to its citizens.

A large portion of the Australian population comprises youth and educated people that use conventional and advanced trading platforms to engage in the financial market.

 

 

Flexibility

 

Web-based and mobile-based trading platforms offer day traders the flexibility to execute trades from their homes, offices, or travels at any time.

 

In this way, traders enjoy complete control over their trading decisions.

 

Leverage

Many brokers offer varying “leverage” to day traders to take larger trades by only investing a smaller amount of money. This technique helps traders amplify their returns. However, this method also multiplies the losses and must be used cautiously.

 

 

 

 

9. What Is The Trading Tax In Australia?

The profit you gain from day trading is taxed like a business income in Australia. The Australian Taxation Office is the official body responsible for revenue collection in the country.

Before starting your day trading career, it is essential to understand the tax consequences of buying, holding, and selling financial instruments in Australia. Knowledge of tax implications will help you trade legally without needing to pay more than you should.

Here is how trading tax is levied for an Individual and as a Business:

 

 

In Case of an Individual:

The tax-free threshold for an individual trader is $18,200.

Individuals are charged in the following manner based on their income rate:

 

 

Resident Tax Rates 2023–24

 

• 0 - $18,200: Nil$

• 18,201 to $45,000: 19c for each $1 above $18,200

• $45,001 to $120,000: $5,092 plus 32.5c for each $1 above $45,000 

• $120,001 to $180,000: $29,467 plus 37c for each $1 above $120,000

• $180,001 and above: $51,667 plus 45c for each $1 above $180,000

 

The above rates do not include the Medicare levy of 2%.

 

Individual traders can reduce their capital gain using any of the following options:

 

• The indexation method 

• The discount method

• One or more out of the four CGT concessions for small business

 

 

In The Case of A Company:

 

• A tax-free threshold is not applicable

• The company tax rate is kept at 30%

• The lower company tax rate is 27.5% 

 

The discount method is not available for companies to lower capital gain, but they may fulfil the conditions prescribed for the indexation method.

 

 

10. Frequently Asked Questions (FAQs) On A Day Trading Career

 

What Is The Best Day Trading Platform In Australia?

Below is the list of popular trading apps for day trading beginners in Australia:

 

• eToro - Best Overall Trading Platform / App 

 

 

• CommSec: Best App With a Diversity of Trading And Market Research Tools

• AvaOptions – Best Day Trading Platform for Options Trading

• IG – Ideal Trading App for Experienced Traders

 

 

Is Day Trading Legal In Australia?

 

Yes, day trading is completely legal in Australia. However, choosing a broker authorised and regulated by the Australian Securities and Investments Commission is necessary.

 

 

How Much Does A Day Trader Earn In Australia?

 

The day trader's salary depends on trading capital, the number of trades you take in a month, trading philosophy, lifestyle, trading strategy, and type of employment.

 

Day traders who trade with smaller capital earn comparatively less than those with more money. However, when they use more capital, they also risk losing more. It depends on the day traders experience.

 

Day traders work in reputed private or public firms, earn a regular salary, and enjoy Medicare benefits and recognition. If you work for an investment firm, you can make between $75k and $130k per year.

 

Top traders in Australia who are proficient in dealing with multiple funds can even earn up to $576,000 annually. On the other hand, the take-home salary of an average day trader is between $100k and $180k in a year.

 

How To Become A Day Trader With $100?

 

New traders often begin with a small amount of money to get practical experience and feel more confident before making bigger trades. This approach can avoid significant losses.

 

To trade with $100, choose the right trading strategy, select the right broker and trading account, and follow strict risk management rules:

 

• Choose a broker in Australia, for example, eToro (You can create an account here), with a minimum deposit capital requirement of $50 or less. 

  (eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

• Leverage becomes an option when you trade with a small amount. Per the updated ASIC regulations, brokers can now give maximum leverage as 30:1. (Using leverage (borrowing to invest) comes with a lot of risk and should be treated cautiously. Traders can lose more capital than they have invested)

• Choose financial instruments that offer higher volatility to capitalise on price movements to make profits even with a small investment. For example, trading currencies is a popular option for small capital traders, providing the highest volatility to traders in Australian and global markets.

• As your capital is only $100, you must keep strict stop losses to keep your losses low and retain your money. (Trading comes with a lot of risk to loose capital)

• Starting with a demo trading account could be an ideal way to familiarise yourself with a trading platform.

 

 

How To Day Trade Cryptocurrency (Crypto)?

 

Many investors consider cryptocurrencies a thrilling trading opportunity with plenty of volatility and impressive returns, but they come with a lot of risk of losing all your capital.

 

Traders must be careful when buying these currencies because they are less predictable than regular shares and carry enormous risks.

 

Nevertheless, The cryptocurrency (crypto) market offers several advantages. It operates 24/7, allowing successful traders to work part-time or full-time from anywhere. Additionally, the market boasts a vast selection of over 7,000 cryptocurrencies available for trading.

 

To trade in cryptocurrency, you need to have an effective risk management strategy due to its highly fluctuating nature:

 

• Invest in Cryptocurrency trading education

• Get a good understanding of Altcoins and Bitcoins, and Blockchain technology

• Practice day trading and keep improvising your skills

• Find a reputable trading exchange to stay safe from online hacks that frequently occur in cryptocurrency (crypto) trading.

• Choose the right crypto pair to trade them on an intraday basis.

• Stay updated on crypto news.

• Never trade money that you can’t afford to lose. Use only your surplus capital that you will not use for at least six months. 

• Risk only 1% of your trading capital on a single trade.

 

 

Is Day Trading Profitable in Australia?

 

Day trading can be lucrative for professional and experienced day traders. You don’t earn a regular salary. Instead, your income is derived from your profit after deducting commissions, trading fees, trading software costs, etc.

 

Furthermore, your profitability in this profession depends on your ability to stay disciplined, emotionally balanced, and stick to your trading strategy.

 

Beginner traders should spend time learning the stock market and gaining experience before starting trading financial markets to avoid losses.

 

 

 

Is Day Trading Worth It?

 

Yes. Day traders can make money by accumulating small and frequent gains. Their net profit varies based on available capital, trading strategy, and risk management plan.

 

However, day trading involves many risks that can lead to losing your investment capital. If you do adequate stock analysis, practise profitable trading strategies and risk management techniques, and remain educated on news and market trends affecting trades, day trading could earn you decent profits.

 

 

How Much Money Do You Need To Start Day Trading?

 

Some platforms, like eToro, only require $50 to start day trading.

 

If you don't have a trading account yet, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

 

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

 

However, on most trading platforms, day traders must pay transaction fees for each buy and sell trade they place, brokerage fees, yearly account maintenance fees, etc.

 

The cost of day trading also depends on the market conditions, the markets you trade in, your risk-taking attitude, and your circumstances.

 

 

 

How Do You Know If You Are Fit For Day Trading?

 

Day trading can be the right investment strategy for you if:

 

• Are you good at maths? Day trading requires heavy analysis of trading volume, price movements, and the underlying companies. 

• Do you have ample time, and can you be flexible? Day trading requires a high commitment level, time, and long hours before a computer to get relevant information handy. It manually monitors the signals to set up a trade. 

• Are you fond of following the market? Day traders immerse themselves in economic data, charts, numbers, etc., which gives them a trading edge.

• Are you disciplined? To be successful in day trading, you also require patience to wait for strategic signals to turn favourable before entering the market. Also, you must hold on to your strategy rather than trying to create value on the fly.

 

Day trading takes immense dedication. If you have answered "Yes" to most of the answers to the above questions, day trading is worth your time and investment.

 

Also, consider the factors influencing day trading and how to select the day trading strategy, develop a day trading plan, manage risk, and monitor your positions when pursuing the strategy.

 

 

What Are The Five Most Important Things For a Day Trader?

 

Day trading is not for people who take it as a hobby or an occasional activity. It will only benefit you if you are serious about making money.

 

Though there is no assurance of how much average rate of return you will make over any period, you can master strategies to lock in gains while reducing losses.

 

If you have capital, discipline, training, risk management, and patience, you have better chances to become a successful day trader.

 

 

How Many Day Traders Succeed?

 

The success rate for making gains from day trading is relatively low. Only around 5% to 20% of day traders make consistent profits.

 

 

How Many Day Trades Can You Make In a Day?

 

Based on the strategy applied, most day traders place tens to hundreds of trades daily, on average.

 

With high-frequency and algorithmic trading systems, day traders can make thousands of individual trades daily.

 

However, more than the number of trades you take, your discipline and the profitability of your trading strategy determine your profit through day trading.

 

 

Can Day Trading Be A Full-Time Job?

 

Yes. It can be only those who are great at maths, can think logically, and can control impulsive behaviour while trading.

 

 

 

How Do You Make Money From Day Trading?

 

The checklist below will give you clarity on how to begin a day trading journey:

 

 

Step 1: Acquire knowledge

 

• Research and study the fundamentals of day trading

• Learn about the fundamental and technical analysis of a stock

• Understand the potential risks and rewards of day trading

 

 

Step 2: Have a Solid Trading Plan

 

• Define your investment goals and risk tolerance

• Consider capital and leverage requirements 

• Develop a concise and clear trading strategy

 

 

Step 3: Choose The Right Trading Platform and Tools

 

• Sign up with a trusted and registered brokerage platform

• Practise using the platform

• Identify and set up the essential trading tools, including charting software, real-time news, etc.  

 

 

Step 4: Define a Risk Management Strategy

 

• Identify potential risk scenarios 

• Develop contingency plans 

• Calculate and fix appropriate position sizes 

• Establish risk management strategies like stop-loss orders to manage risk

 

 

Step 5: Handle Your Psychology and Emotions

 

• Practise discipline to stick to the trading plan 

• Manage emotional and psychological stresses that may arise during trading

• Avoid acting on impulses 

 

 

Step 6: Decide Your Availability

 

• Evaluate how much time you can devote to day trading

• Set a schedule that enables you to trade during market hours

• Consider the impact of other commitments, including family or work obligations

 

 

 

What Factors Impact Day Trading?

 

Before you start day trading, you must consider a few key factors to trade any market.

 

 

• Liquidity of a Market: It indicates how easily and quickly you can enter and exit from the market. High liquidity is crucial for day traders, who usually execute multiple trades daily.

 

• Volatility of The Asset: How fast the asset price moves is another primary consideration for day traders. The best opportunity for short-term profits is the timings when you see high volatility.

 

• Trading Volume in an Asset: A high trading volume indicates a lot of interest in trade. It helps find entry and exit points in the asset.

 

 

Why Do Most Day Traders Fail?

 

Though the sky is the limit to how much profit you can make, day trading carries substantial risks due to the unstable market and the absence of an effective risk management strategy to exit trades at the right time.

 

Here are a few common mistakes investors should avoid:

 

• Excessive-trading

• Using high leverages for higher profits

• Failing to set stop-loss orders

• Chasing losses

• Trading stocks without research

• Not sticking to a trading plan

• Letting emotions guide your trading decisions

 

Day traders can also give into their different types of biases, including Fear of Missing Out, overconfidence bias, loss-aversion bias, confirmation bias, and anchoring bias.

 

Mistakes are common in trading. Even successful traders don’t get all their trades right. However, we should learn from them and constantly refine our trading strategy.

 

 

 

How To Manage Day Trading Risk?

 

A risk management strategy is crucial to avoid overnight funding costs and the risk of slippage in day trading.

 

Tools like stops and limits are essential in a trader’s risk management toolkit and help them minimise potential losses. Before starting day trading, they must also consider the market’s volatility, trading volume, and liquidity.

 

Most successful day traders (not “investors”) have this ability to cut losing trades quickly; however, it allows profitable businesses to run.

 

The sooner a trader acknowledge when they go wrong and take action, the higher the chances that they will make more profits on winning trades than they lose on losing trades.

 

 

How Hard Is Day Trading?

 

Day trading is a challenging but doable job. You need in-depth knowledge of market operations, advanced trading strategies, and years of trial and error to identify workable strategies for a profitable, long-term day trader.

 

Day trading is about proper execution and emotional stability. Having the discipline to exit the trade once you lock in a profit is the key to surviving long-term.

 

If you're a new trader wanting to try day trading, start by watching YouTube lessons to learn, and then practice trading with a demo account.

 

Overall, day trading can be fulfilling for skilled and disciplined day traders comfortable with taking risks. It requires good research abilities and a well-established trading and risk management strategy.

 

 

How To Become A Day Trader From Books?

 

There are several classic books that not only document the journey of real-world traders but also share their trading and investing strategies and tips, such as the mental discipline and psychology of trading that made them successful day traders.

 

Here are the most recommended books for aspiring traders and investors:

 

• Reminiscences of a Stock Operator by Edwin Lefèvre (1923)

• The Intelligent Investor by Benjamin Graham (1949)

• Market Wizards by Jack Schwager (1988)

• Trader Vic II: Principles of Professional Speculation by Victor Sperandeo (1994)

 

 

 

How To Day Trade US Stocks From Australia?

 

The below list of share trading platforms provide you access to US stock exchanges from Australia:

 

• eToro

• IG Share Trading

• Superhero

• Stake

• CommSec International

• Nabtrade

• Westpac

• Interactive Brokers

 

 

11. Conclusion

 

Day trading presents a potential opportunity to earn money in financial markets, but it's essential to be aware of the risks involved. Beginners might view it as a quick money-making machine, but substantial losses can occur if approached carelessly without discipline.

 

Investing time and effort in market research and developing suitable trading strategies is crucial to achieving success as a day trader. The key is to stick to these strategies consistently.

 

Continuous learning, patience, and emotional control are vital to making wise decisions and achieving monetary and professional success in day trading. Remember, it's not a guaranteed path to riches, but with dedication and the right mindset, it can be rewarding.

 

If you don't have a trading account yet, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

 

(eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

 

 

 

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