Beginners Guide to Day Trading

This fresh-eyed, beginner’s guide covers how to do day trading in the UK…

Updated: May 18, 2024
Matt Crabtree

Written By

Matt Crabtree

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This day trading for beginners guide will help you get started and offer the essential information and tools required if you have the motivation, time, and devotion available to become a successful day trader in 2024.

The recent market volatility has led to an increase in the number of individuals interested in day trading since, at first glance, making money by buying and selling stocks within a single day seems to be a simple and fast method to do it.

Newcomers should be aware that even seasoned day traders have a hard time guaranteeing success due to the unpredictability of stock price fluctuations.

It is essential in 2024 for anybody thinking about day trading to have a firm grasp of both technical and fundamental analysis. What follows is a comprehensive beginner guide on day trading that should help you get started immediately.

Beginners Guide to Day Trading (2024): Who are You/What to Look for?

A broker is an intermediary who facilitates trades between buyers and sellers on the market. Choosing the right broker is critical to your financial success. Some considerations are listed below to help you choose:

  • Speed: Owing to the huge volume of transactions you may do daily, it is crucial that your orders be processed quickly and that you are able to get the necessary price when you need it.
  • Expenses: Day trading is more practical if fees and commissions are cheap. As active traders are likely to make frequent trades, reducing their trading expenses is essential.
  • Licences: Make sure your broker complies with all applicable regulations. They'll have to safeguard your financial interests by law.
  • Look for online brokers with fast response times and reliable customer care, since you will likely need help with your day trading plan at some point.
  • Tools: As a day trader, you should be able to take advantage of favourable spreads, leverage, and margin.
Who Are You?Day TradingSwing TradingTraditional Investing 
GoalTrading assets with high volatility can lead to high returns.Price changes have nothing to do with how well a company is doing.Long-term investment growth from businesses that make money.
Trader typeAggressive, alphaTacticalSlow
Leverage1:4, and sometimes higher, for the intraday marginThe overnight margin is 1:2.No leverage
Hold durationIntraday aloneOvernight or weeks-longMonths or years
Trade regularityHighA few times a week or monthVery few 
Analytic approachTechnicalAnalytical Fundamental
Short sellingFrequently Less frequent Never
Main riskAddiction and stress Overnight changesTime and crashes
Time-costFull-time`Part-timeLeisurely
ToolsScreenersAnalysisStats and financial reports
Deposit minimumUnder £20,000N/AN/A

The Question of Trading Platforms: Does It Meet Your Requirements?

The trading platform you choose should have all the functions you need, such as a stop loss, a limit order, and sophisticated charting.

Markets and AssetsForex traders have distinct market and asset preferences than stock traders. You need to be able to trade the right currency pairings or stocks and shares with your broker.

First, read our in-depth analyses of several online brokers. These should help you determine whether a broker is a good fit for your short-term trading needs.

Day Trading: A Brief Introduction

Day trading is defined as the purchase and sale of securities inside the same trading day. 

Before the markets shut for the day, online day traders will close out their positions to ensure a successful outcome. Several deals may be opened and closed during a single trading session.

It's very uncommon for brokers to use varying definitions of “active” or “day traders”. The amount of transactions a customer opens and closes monthly or annually tends to be a major factor in their assessment. Other companies go even farther, referring to ‘hyper-active traders' as a category unto itself.

Day trading often involves employing trading tactics to profit from modest price fluctuations in highly liquid equities or currencies.

Our goal is to provide you with an introduction to the discipline of day trading 👇 and an understanding of the requirements necessary for success in this field. We show you how to profit by only a few pips in a few minutes on the foreign exchange market, as well as how to capitalise on news events in the stock market, crypto assets, or on indexes.

Beginner’s Day Trading: What to Trade?

The first part of our beginner’s guide to day trading is knowing where to go. Day traders may make use of several marketplaces and methods of price prediction.

Day trading on the S&P 500 entails buying and selling stocks in large corporations like Tesla, Facebook, and Microsoft. Day trading in the foreign exchange market involves dealing in a variety of different currencies over the course of the day.

Although index funds are mentioned often in modern financial advice, their sluggish nature makes them inappropriate for day-to-day trading. Nonetheless, they are excellent investments for the long run.

Interest in day trading digital money is also on the rise. The market for day trading in virtual currencies like Bitcoin, Litecoin, Ethereum, and others is growing. Day trading in bitcoin might be a fascinating endeavour due to its high degree of volatility, growing transaction volume, and uncertain future.

eToro Copy Trading

Low on time?

eToro has earned a solid reputation as a safe and secure automated trading platform that offers a wide variety of assets, is easy to use, and charges reasonable fees. eToro is primarily an online broker and social trading platform, with over 17 million users.

Users may see market data for thousands of assets and manually invest or trade in them. These assets include stocks, ETFs, cryptocurrencies, currency, and more. Thus, whether you're searching for an automated platform to trade stocks, currency, or Bitcoin, eToro has you covered.

While trading with eToro, you won't have to worry about paying any commissions or monthly platform costs. Yet, they also give access to a suite of automated trading tools.

One of the most cutting-edge tools in this regard is eToro's Copy Trading function. This tool's bare bones functionality is to replicate an eToro client's settings and preferences.

eToro logo

Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

You may easily discover a pro-investor that fits your financial objectives and risk tolerance from among the thousands of vetted and experienced traders that have joined up for the programme. Because of this, it is also among the top trading platforms for newcomers.

Traders

If you sign up for eToro, for instance, you'll have access to a record of every transaction that investor has made on the site since they signed up.

Then you can see the trader's monthly returns, maximum drawdowns, favoured assets, transaction durations, and risk ratings. If you use filters on each of these important variables, you may find a trader that fits in with your investment philosophy.

Take, for example, a £2,000 investment in a certified eToro copy trader engaged in currency day trading. The day begins with a 5% wager on the GBP/AUD pair, the trader's first position of the day. A few hours later, the trader has made a 10% profit and decides to liquidate the position. Your personal eToro account would be mirrored with a copy of the transaction.

The bare minimum to use eToro's copy trading tool is merely £200 per copy trader, and there are no commissions or other costs on top of that. The second feature of this first-rate automatic trading platform is called CopyPortfolios.

eToro's Copy Trading Tool

These eToro-managed portfolios are ready-made options for investors. CopyPortfolio, which allows users to invest in a variety of cryptocurrencies, is one such example. Anyone interested in investing in the search for a cure for COVID-19 may do so by opening a Vaccine Portfolio.

Like eToro's Copy Trading feature, CopyPortfolios are free of charge and incur no commissions. Nevertheless, the minimum investment amount is larger, often $1,000 or more but varying with the approach.

eToro is supervised by the Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC).

The site accepts deposits from a wide variety of payment methods, including debit cards, bank transfers, and e-wallets like Neteller and Skrill.

eToro's automated trading services may also be used on the go using their top-notch mobile trading app. That’s why we’ve highlighted it in our beginner’s guide to day trading.

1. Forex 

The Foreign Exchange, or Forex, Market is the largest and most actively traded financial market in the world. Day traders are drawn to the foreign exchange markets because of the high turnover.

Short-term chances in a currency pair that is currently moving are plentiful, and the pair's high liquidity makes it easy to initiate and close transactions quickly and smoothly.

There are alternative methods of trading foreign currency that are better suited to technical analysis. Furthermore, the foreign exchange market is decentralised. Hence, forex brokers may make currency trading available around the clock, every day of the week.

They provide a terrific stepping stone for novice or prospective traders who are also working full-time and have a wallet to connect to an account. 

2. Cryptocurrency 

While mining (how mining works) may not be as feasible as it once was, due to the high volatility of cryptocurrency prices, trading cryptocurrencies like Bitcoin and Ethereum has exploded in popularity.

Because of their meteoric rise, cryptocurrencies have attracted a slew of new investors. Moreover, brokers are always innovating to make it simpler for ordinary investors to get entry to these markets.

There is constant progress being made to reduce the complexity of forming an opinion on any of the emerging blockchain-based currencies. The moment to invest, whether you're a bull or a bear, is now since the barriers to entry are almost nonexistent.

3. Stocks

Stocks may be bought and sold in a number of different ways, including via physical transactions, futures contracts, options contracts, and exchange-traded funds (an “Exchange Traded Fund” owns a number of different commodities and stocks and is exchanged like a single stock).

Compared to the more conventional buy and hold” approach, intraday trading in stocks might have unique profit potential. When it comes to stock price speculation, CFDs and spread betting, for example, allow investors to profit from both rising and falling markets.

Margin or leverage further reduces the initial capital outlay for entering a position, but does so at the expense of increased exposure to potential loss.

This will allow you to base your trading decisions on the most recent press release, product launch, or financial report, as well as on technical indications.

4. Options 

In terms of complexity and predictability, binary options are at the top of the heap since both the expiration time and the payout for a successful transaction are clearly stated beforehand. After a certain period of time (say, 1 minute), a trader needs merely to guess whether the price will be higher or lower.

Understanding how binary options trading works is straightforward, since the risk is restricted to the deal amount and the possible payoff is known in advance.

5. Futures & Commodities 

The last type we’ll cover in our newbie’s guide to day trading is speculating on the future value of a commodity or asset is at the heart of futures trading.

If an airline is worried that fuel costs may rise in the future, it might hedge its bets by making arrangements to purchase gasoline at a certain price. Futures contracts may be used for speculative purposes since their value would increase if the price of gasoline increased.

Commodity trading involves making predictions about the price of commodities such as oil, natural gas, food, metals, and minerals like gold. Commodity trading is one of the oldest and most liquid financial marketplaces.

Getting Started Day Trading as a Beginner

There has been a reported increase in the number of newcomers to the field of day trading. Yet, because of trader academies, seminars, and tools like trading applications, modern day traders are more savvy and well-informed than their predecessors ever were.

There are many free online resources for learning the ropes of intraday trading and avoiding common pitfalls encountered by newcomers.

Day trading fundamentals: practise with virtual money before investing real cash. A demo account will allow you to get familiar with trading stocks or FX in real time while providing you with helpful trading advice.

You can get some practice in before risking any real cash with these free trading simulators. Moreover, they provide practical instruction on how to predict market movements in stocks or currencies.

Substituting instructive reading and viewing for entertainment media and other time wasters is also essential. You'll get a thorough knowledge of trading technique and tactics, plus a firm grasp of the intricacies of the industry as a whole. When you are just starting out in online day trading, Google can be the best place to start.

Books for Beginners 

  • Day Trading and Swing Trading the Currency Market, Kathy Lein
  • Author Ann Logue of “Day Trading for Dummies”

The fundamentals of day trading are outlined in both publications. You'll get suggestions on which stocks to buy, in addition to fresh perspectives on how to approach your investment plan. Investment in education yields the highest rate of return, as Benjamin Franklin noted.

Although the ‘for dummies' series is a great place to start, it's important to also explore more advanced works on trading.

The Study of Patterns and Technical Data

One may get insight into people's intentions while trading by analysing the patterns in their day charts. For instance, they may draw attention to volatility and other s&p day trading signals that may aid in predicting price changes in the future.

Reversal and continuation patterns are the two most prevalent occurrences in day trading charts. The former implies that a trend will revert after it has run its course, whereas the latter predicts that it will continue to grow.

You'll have a much better grasp on how to put your trading methods to use if you have a firm grasp on the aforementioned patterns, as well as others like triangles, head and shoulders, cup and handle, wedges, and many more.

Methods for Novice Day Trading… 

We have to mention social media in our novice’s guide to day trading. When you visit forums like Reddit, you'll find a lot of trading newbies that aren't prepared to trade well, so they take any momentum tip they see and end up losing money.

Successful traders use day trading tactics across all markets, from foreign exchange to grain futures. In day trading, even a one percent advantage might make all the difference between profit and loss.

All the many day trading methods and approaches out there depend on precise information that has been meticulously shown in charts and spreadsheets. Choices might involve:

  • Swing Trading
  • Scalping
  • Zone trading
  • Volume-based pricing system
  • Arbitrage trading

Success in short-term trading is most often achieved by those who are steadfast in their adherence to predetermined techniques, rules, and restrictions. As time goes on, even little setbacks build up. 

Opening Account

Day trading requires a trading account 🖱️, which must be opened as part of the initial setup process. There is a wide variety of accounts from which to choose; the key is to choose the one that best serves your requirements.

Cash Account

Day trading on a cash account (sometimes called “no margin”) means you may invest just the funds now available in your trading account. Although this reduces your profit potential, it also keeps your losses within reasonable bounds.

Margin Account (Leverage) 

You may borrow money from your broker if you have a margin account. This will allow you to increase your earning potential, but it also comes with a higher chance of loss and stricter regulations. You shouldn't choose this if you're hoping to enter the world of day trading with zero initial investment.

To trade on margin, you'll often need to make a minimum deposit with your broker. A margin call occurs when your broker requests more funds to offset any possible losses.

Account details, such as cash and margin options for day trading, may be found in more depth in the brokers list of the review section of our site. The Account Types page also delves further into business and premium accounts.

Glossary…

Mastering the jargon and terminology used in trading is an important part of our beginner’s guide to day trading because it can provide you access to a wealth of information. In order to make day trading more approachable, we have compiled a glossary of often used terms below.

General Terms 

  • In order to make a purchase, your broker will double your initial deposit by a factor called the leverage rate.
  • The term “automated trading” refers to computerised systems that make transactions on your behalf according to a predetermined set of rules and criteria. Algorithmic trading systems, trading robots, and simply bots are all names for the same thing.
  • When a business first goes public, it conducts an initial public offering (IPO), in which it sells a certain number of shares to the public in order to generate cash.
  • Float is the total number of shares that may be bought and sold on the market. In an initial public offering (IPO), the float is the number of shares made available to the public.
  • A stock's beta indicates its volatility relative to the market as a whole.
  • Stocks that cost less than £5 per share are considered “penny stocks”.
  • The profit/loss ratio is a percentage-based indicator of a system's profitability.
  • Entry points are the prices at which you purchase to enter a position.
  • Exit prices are the levels at which a trader or investor closes out a position and receives a profit.
  • With day trading, a bullish stance indicates that one anticipates a rise in stock price.
  • A bear or bearish investor is one who believes that the price of a stock will decrease.
  • What we mean by “market trends” is the long-term trajectory of a securities.
  • You may quickly join and leave trades with the use of “hotkeys”, which have been programmed to do so. This is especially helpful if you're in a losing position and want to cut your losses asap.

Data Visuals, Analysis, and Strategic Planning

  • A support level is a price at which buyers are willing to step in and keep the market price from falling any lower.
  • The resistance level is the price at which further purchases of the asset would be met with weak demand (and vice versa).
  • To put it simply, moving averages are a must-have for their ability to alert you to buying and selling opportunities. Although they won't provide you early warning if a shift is coming, they will verify whether or not a current trend is continuing. If you put them to good use, you may take advantage of a rising pattern.
  • The Relative Strength Index (RSI) is a momentum indicator that may be used to evaluate the rate and direction of a security's price changes over a certain time frame. Simply put, it provides an assessment of the significance of the security's recent price performance. Here's a helpful hint for day traders: use this index to spot oversold and overbought levels in the market so you can avoid making costly mistakes.
  • The MACD is a technical indicator that measures the divergence or convergence of two exponential moving averages of a given instrument. Since it provides such simple buy and sell trading signals, MACD is a favourite among novice traders.
  • Bollinger Bands are used to analyse price fluctuations by comparing current levels to historical highs and lows. They may facilitate the identification of trends and the arrival at well-considered trading judgements.
  • Stochastic measures where the current price falls inside a predetermined price range. By comparing the last traded price of a securities with its trading range, the approach attempts to forecast when prices will change direction.

Comparing Day Trading vs Other Forms

Let’s compare and contrast day trading with other investment strategies. Although day trading is a possibility, choosing among swing trading, conventional investment, and automation may be challenging.

Swing trading is distinct from day trading in that swing traders' wagers might span many days or weeks. If you're a trader who likes to keep your options open, this strategy may still be useful.

Investing in popular assets like bonds, stocks, and real estate with an eye on long-term value appreciation is a classic example of traditional investment. During the course of a year, reasonable returns on investments hover around the 5-7% mark.

Traditional investment yields too little for it to make much of an impact on a daily basis unless you are already quite wealthy and can invest millions. Nonetheless, a savvy investor will think about the long term.

A rising number of individuals are using robo-advisors. You choose a profile, then enter your desired level of risk and investment horizon. At that point, an algorithm will handle everything. This method is too sluggish to be used on a regular basis and is better suited to long-term investments.

These days, you may get trading signals from a variety of sources, and they're usually rather affordable. Check for evidence of success before committing.

Trading stocks for a day's profit and investing for the long haul are polar opposites. They call for contrasting approaches and frames of mind. Think about your availability and the desired pace of progress before committing to one.

To supplement your day-to-day trading, you should have a long-term investment strategy.

Full-Time Day Trading

You got this far in our beginner’s guide to day trading; maybe you’re a serious apprentice. The first place to start is Mastery, by Robert Greene (save time by getting the audiobook). 

So, you want to be your own boss and trade stocks full-time from the comfort of your own home? In that case, you should know that you'll need access to some high-end, specialised hardware and software to give you the advantage you need. You need self-control, patience, and the mindset of a craftsman to succeed at this.

Data Analysis Programs

Day traders who depend on technical indicators are more likely to use software than news sources, despite the latter's lower credibility and greater accessibility. The best trading programme, regardless of if you use Mac or Windows, will have:

  • Recognizes flags, channels, and other identifying patterns automatically,
  • Use genetic algorithms and neural networks to improve your ability to forecast price changes.
  • Integrating with a broker allows for hands-free trading by eliminating the need for human intervention and streamlines the trading process by reducing the need to consider personal feelings.
  • Backtesting is the process of simulating the results of future transactions using historical data. This helps investors evaluate the potential returns of various trading strategies.

Many news sources are also crucial to the success of a day trader. One of the wisest trading quotations is “knowledge is power”, which was spoken by Kofi Annan. You may increase your potential for success in day trading by increasing both your level of knowledge and your speed of reaction.

Psychology

Those who choose trading as a profession must learn to control their emotions. Trading in and out of hot stocks requires quick thinking and decisive action. Some traders get addicted to trading because of the rush they experience from making trades. This may be avoided by adhering to the standard day trading principles outlined below.

Fear management (even the “greatest” stocks might start falling): As a result, many investors sell their assets when panic sets in. Today, they're able to avoid losses, but at the expense of future profits. Acknowledging your fear and accepting it as a normal response can help you keep your cool and behave sensibly.

Knowing when to bail out of a winning position before being whipsawed or blasted out of it is difficult (‘pigs be slaughtered'): conquering your own gluttony is no easy feat, but it is essential. 

If you want to make it as a day trader, you must be present and disciplined at all times. It's crucial to be aware of your own psychological blind spots and maintain emotional distance.

Education

In our search for a comprehensive banking and trading resource, we came up empty, so we created Comparebanks.co.uk. As this site should not serve as your primary resource for studying day trading, there are additional resources available to supplement the content presented here:

  • Podcasts
  • Blogs
  • Day Trading Courses Online
  • Game applications for practise
  • Books
  • Ebooks
  • Audiobooks
  • Seminars
  • Journals
  • Boards of communication like Discord
  • Forums
  • Chatrooms 
  • Newsletters
  • PDF Instruction Manuals

For a considerable sum of money, you may hire a personal day trading mentor who will be available for you whenever you need advice. Choose the methods of education that work best for you, since knowledge is key. It's not like you have to resort to the ‘Day Trading for Dummies' books.

Taxes

Day traders have vastly different tax consequences depending on their “tax resident” status. In addition, the tax rules have not yet caught up to the rapid growth and popularity of digital currencies like Bitcoin; is Bitcoin a money or a commodity?

The tax treatment you get may also be conditional on details unique to you. The UK's HMRC, for instance, is known to take a three-pronged approach to day trading:

  • Day trading is very speculative and may be compared to gambling, thus the money made from it is likely to be exempt from federal taxes like the income tax, the company tax, and the capital gains tax.
  • A high level of self-employed trade activity is probably liable to business tax.
  • Profits and losses from a private investor's major dealings would be subject to the capital gains tax. That is very prohibited and might lead to severe financial consequences if you paid just company tax.

It's possible to land in any of the three buckets due to the ebb and flow of day trading over the period of a few years. While a licence is not required, it is highly recommended that you keep close tabs on your transactions, consult a tax professional, and file your taxes in accordance with all applicable rules and regulations.

So, what do you have to think about if you want to be a great day trader?

7 Principles to Day Trading Success…

Whether you're trying to find something you can perform from home or you just want to start day trading as a pastime, these seven tips will help you get started.

1. Preparation Work

One's early prospects improve in proportion to the quality of their beginning. It means the greatest information may be found right where you are—at your workstation, gazing at your displays as your fingers dance over the keyboard.

It includes a stable and quick asset scanner and live feed, as well as software that won't break at the worst possible time, and the greatest trading platform for your PC or Mac laptop or desktop.

2. Don't Lose Sight of Reality

That may have seemed simple in the movies, but don't be deceived. It takes time and effort to become a collegiate day trading expert. That Bitcoin hedge fund won't want you after reading just one Bitcoin tutorial. Learn the ropes by ordering several trade books from Amazon and consulting that spy pdf guide.

3. Keep It Simple

In the beginning, this is very vital. The S&P 500, bond futures, mutual funds, Nasdaq futures, Nasdaq, blue chip stocks, equities, and the Dax 30 are all potential investment avenues, but for now, choose one and stick with it. Master the art of market or security forecasting first, then try your hand at others. The rest of the marketplace is patiently waiting for you.

4. Controlling Dangers

Indeed, this is among the most crucial insights to acquire. You need to implement a method of financial management that will enable you to trade consistently. Ask yourself whether it's worth it to try day trading if you know you'll be broke by the end of the first month.

As shown by past performance, many successful traders risk little more than 1% of their total capital on any one deal. In this case, if your account balance was $25,000 or £25,000, you would only be able to afford a $250 or £250 transaction.

A person should take time with an excel sheet and a calculator and do the math before taking on any role.

5. The Need for a Log

Keeping a spreadsheet with precise profit records is a must for each day trader. You may avoid or at least significantly reduce the severity of future failures by promptly reviewing past successes and failures in order to spot and correct any omissions or overlooked risks.

6. Responsible Judgement

You'll have to make a lot of tough choices when you first start day trading. Is it a good idea to join Plus500? Is Coinbase suitable for day trading? Is your office space conducive to work? Where would one locate a suitable Excel model? Can you explain the process of creating a watch list? In-depth explanations of all these issues and more may be found across these pages.

Our top suggestions also include more in-depth tutorials that could be useful.

7. Timing

The marketplaces are as segmented as the globe into groups of individuals who all live in various time zones.

The finest entry signals for the CAC 40 tend to occur early in the trading day, and if you wait until 11 a.m. ET to begin trading, you may discover that you have lost out on the majority of the day's potential profit. Thus, you may need to significantly alter your work schedule if you aim for the very top.

Beginners Guide to Day Trading (2024): Compare Banks Summary…

If you work hard, how much do you expect to make?

Let’s end our beginner’s guide to day trading the right way. If you're like most people, the prospect of financial gain is the most compelling aspect of your pros and disadvantages list.

Many of us have heard the tales of day trading multi-millionaires who began with just a thousand dollars, but eventually became market masters and made a mint. Although these situations do arise, the truth is that salary ranges may be rather wide.

You'll need dedication, self-control, and a plan if you want to make a living day trading. You may read extensive accounts of everything mentioned here.

So, does day trading really work? In your case, it may work if you're prepared to put in the effort.

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