Day Trading in the UK 2024 - Top Brokers, Tutorial, Strategy and Tips (2024)

Learn what day trading is and where you can sign up for the best broker accounts. Compare all the top brokers that cater to day traders and learn which financial products are most profitable.

What is Day Trading?

Day trading is the potentially lucrative trading method of buying and selling a security within the same trading day. It is based on the speculation of a financial instrument going up or down in price. Day trading can be achieved in any marketplace, but in the UK is most commonly practiced with the trading of Foreign Exchange (Forex), Stocks, Options and Futures Contracts.

Generally speaking, day traders are well educated and highly invested in the investment practice of day trading. They watch and analyze the markets, keep up with the latest market moving news, and utilize high amounts of leverage (gearing) along with their carefully chosen strategies to benefit from small price movements in equities and the financial marketplace.

Now that we know what day trading is, who are the day traders? Well, day trading was once an exclusive practice, reserved for people working in financial firms while considering themselves “professional speculators”, or even classing it a lucrative hobby.

However, nowadays just about anyone can become a day trader.

The rise of electronic trading and margin trading software has become available to individuals from around the world. So, if this trading method is available for everyone, how does a beginner get involved?

How to Start Day Trading

Pick a Market

First step for a day trader is to decide which markets you will be trading in, with the most popular being Stocks / Shares (Apple, Facebook, Google etc), Indices (FTSE, DAX, S&P), Forex, and Futures. Commodities such as gold, oil or things like grain prices can also be traded.

Forex markets are quite popular among beginners due to the low initial minimumdeposit accounts of around £250. Binary options deposits can be even lower (from just £10), but are traded without margin.

Futures require more and stocks require the most money to be invested in for day trading. The best advice we can give is to choose just one asset class to begin with. All of them can be highly profitable, but it is best to focus on just one when starting out.

Equipment & Software

Once you know your market, as an individual day trader, you need the proper equipment and software to commence day trading. As anovice day trader, you will need a fast and reliable computer, it doesn’t have to be top of the line, but not the cheapest one either. In addition, day traders require a fast internet connection. You want to be sure your tables and charts are updating as quickly as possible.

Along with all this, you need a trading platform and a broker to commence trading. As a trader starting out, you will want something easy to use and not too complicated. We recommend traders try out the demo accounts associated with most day trading platforms to get a feel of which software platform performs best. As for brokers to go with, make sure they are reputable and regulated, along with low fees, tight spreads and maybe even bonuses.

Learning via virtual accounts is superior to books or courses. Hands on experience introduces trading psychology (though this is increased hugely with a real money account). The same learning curve is difficult to achieve just by flicking through “Day Trading For Dummies” or hastily written pdf.

Market Hours

Another important aspect to consider before you actually start trading is the time of day and how many hours a day you will be trading. As a day trader it’s important to trade the same hours each day to successfully implement and manage your strategy. The best trading hours are usually around the market opening and closing times.

Forex in particular presents interesting opportunities in terms of trading hours. Currencies are traded around the clock with no central market. This means multiple volume peaks and troughs as new regions wake up or shut down. London marketscould be closed – but the GBP/USD pair might still be driven by traders in Indonesia, New Zealand or Hong Kong.

These time zones cycles apply equally to cryptocurrencies. Day trading on Bitcoin or Bitcoin cash will continue around the globe. Lesser known digital currency like Ethereum, Ripple or DASH are also traded 24/7. Cryptocurrency has added a whole new dimension for day traders.

Risk Management

Risk for this type of trading needs to be managed in two ways, trade risk and daily risk. Trade risk is how much you are willing to lose on each trade. An ideal standard is to risk 1% or less of your tradeable capital on each trade.

A trader will manage this by choosing an entry point and setting a stop loss. The stop loss will remove you from the trade if you reach a certain level of loss for that trade. Daily risk is like trade risk in the simple fact that they both limit the total loss amount; only daily risk limits the total losses for a single day. In doing this, bad days are restrained from being too bad and can be recovered by a typical winning day.

Taxes

There is no clear tax applicable for day trading. It will depend on the trading vehicle used, and also how you class the income. For example, if you trade forex at home, for a living, then the tax rules in the Uk suggest you should pay income tax. If however, you trade binary options from home – but class it as a hobby – then no tax will be applicable.

So day traders need to decide how they class any profits. For example, whether they earn a salary and do it “full time”, or not. Rules for forex, cfds and binaries will also differ. If in any doubt, professional guidance should be sought.

Day TradingStrategy

Day trading can be very complicated and it’s easy to get wrapped up with all the trending strategies and complicated chart analysis. One thing to remember is that you don’t need to know it all. All you need is one strategy to focus on, and implement it over and over again. Try out a strategy on a demo account first to see how it pans out.

Top 3 Day Trading Tips

• Stay Informed, Always look for Opportunity!
  Keep track of the latest stock market news and trends in the economy. Do your due diligence and research companies and the markets they serve. If supply is low and there are still enthusiastic buyers, the price may soar. If there is too much supply and dwindling buyers, the price is about to drop. When staying informed and knowledgeable about certain companies and their performance, massive opportunities will arise, resulting in profitable day trading.
• Be a Disciplined and Consistent Day Trader.
  Set reasonable take profit and stop loss limits to minimize your losses and maximize realistic wins. Most successful day traders risk 1-2% of their trading capital per trade. Follow this rule consistently, as if there were no other way. As well, trading at consistent times of the day will maximize your understanding of the markets and provide a routine and calculated trading method which can be determinantal to success.
• Be Realistic and Stay Patient
  When you find a proven trading strategy stick with it. It doesn’t have to win all the time, in fact, most strategies only win 50-60% of the time, so the key is to stick with it and stay informed with market news and the companies you’re trading. As well, sticking with a strategy requires patience. There will be times when the markets take you for an emotional rollercoaster. It’s important to make your decisions based on logic and not emotions, as well as sticking with your plan.

A Winning Strategy

One of the most used and well-known day trading strategies is the “Momentum Trading Strategy”. This strategy relies on market volatility. It can be used alongside other technical indicators and tools that you find on our trading platform as it relies on spotting trends.

In short it’s where a trader analyzes the markets and looks for the best performing assets over a certain period of time. It involves buying these and conversely selling the worse performing assets. Being well informed and knowledgeable of current market moving news is instrumental to the success of this strategy.

News such as a company’s earnings, a new deal or product launch, or some other kind of breaking news relating to the company can force the price to surge. There are many aspects involved with this strategy, and before implementing it in to your routine, learn all about it to become fully aware of its intricacies. Even practice on a demo account first to acquaint yourself without risking your capital.

Conclusion

So, there you have it, all you really need in day trading is consistency with trading hours and times, a set risk level that you unswervingly follow, and a strategy that works most of the time. It’s important to not over complicate these things and stick to a consistent plan with all aspects of day trading, which rules out the emotional factors that can inhibit your trading.

References and Further Reading

• For much more information on day trading, strategies and brokers, we recommend DayTrading.com, which caters specifically to day traders andall information they need.
• Another great resource is Day Trade The Word if you want to know what day trading is.
• PDF: “Do Individual Day Traders Make Money? Study from Taiwan”(Brad M. Barber,Yi-Tsung Lee,Yu-Jane Liu,Terrance Odean, 2004)
• PDF: “The Individual Day Trader” (Juhani Linnainmaa, 2005)

Further Reading