Day trading is a popular and potentially lucrative financial endeavour.
Explore the skills, strategies, expert tips and risk management needed to become a day trader in the fast-paced world of the financial markets.
With CFDs, you can lose more than you deposit, you do not have ownership in the underlying asset, and you may be subject to margin close-outs if you do not maintain sufficient margin.
Day trading involves opening and closing positions within a single trading day, aiming to profit from short-term price movements. You would close all positions opened within the same trading session by day's end, starting anew the next day.
Day traders generally use technical analysis, market trends and leverage to make quick trades, often holding positions for minutes or hours. This trading style requires quick decision-making, discipline and a deep understanding of market dynamics.
Frequent trades |
Short holding periods |
Day traders typically take multiple positions throughout a single session. This high-frequency approach aims to take advantage of small price fluctuations that occur within hours or even minutes. By making numerous trades, day traders hope to accumulate small profits that add up to significant gains over time. |
Day traders rarely hold positions overnight; they usually close all trades before the market closes. This approach helps minimise the risk of adverse price movements that can occur outside of trading hours due to relevant news or financial events. |
Capitalising on small price movements |
Strict risk management |
Instead of waiting for large price swings, day traders focus on profiting from small, incremental price changes. They use technical analysis tools like indicators to identify these fluctuations and act on them quickly. Success in day trading often comes from consistently capitalising on these small movements rather than seeking occasional big wins. |
Day traders usually implement rigorous risk management strategies to help protect their capital in a fast-paced environment. This includes setting stop-loss orders, limiting position sizes and never risking more than a certain percentage of their online trading capital on a single trade. Careful and consistent risk management is crucial for protection against significant losses and to aim for long-term profitability. |
Becoming a day trader requires developing both technical and psychological skills. Technically, you'll need to have a solid grasp of market analysis, understand various financial instruments and develop a keen sense of when to enter and exit trades.
Key skills for day trading:
You need to understand how the markets work. This involves understanding market dynamics and different trading strategies, and getting comfortable with technical analysis. Key elements include recognising chart patterns, using indicators such as moving averages to analyse trends and momentum, and identifying overall market direction. Resources such as the online courses and webinars that are available on IG Academy can help you learn about how the markets work.
All trading activity involves risk, eg market risk and the use of leverage. The likelihood of this risk resulting in unfavourable outcomes is amplified by the fast-paced nature of day trading. You can manage your risk by implementing strategies like setting stop-loss orders, which will automatically close out your trade if the relevant asset’s price moves beyond the parameters you've set. All things considered, it's about never risking more than you can afford to lose on a single trade, and always having a clear exit strategy in place before you even enter a position.
Day trading requires you to be flexible, constantly adjusting your strategies to fit the ever-changing market landscape. This means staying alert to sudden shifts in trends, being ready to pivot your approach at a moment's notice, and never getting too attached to a single trading method. By embracing change and staying nimble, you'll be better equipped to surf the unpredictable waves of the financial markets.
In the fast-paced world of day trading, it's useful to be able to act quickly. This involves analysing information, trusting your instincts (backed by knowledge and experience) and acting decisively, even under intense pressure. Developing strong decision-making skills is like building mental muscle – the more you exercise it, the stronger it becomes, enabling you to make split-second calls that could mean the difference between profit and loss in trading.
Develop a strategy that works for you, and don't let emotions drive your decisions. Markets are dynamic, with conditions constantly evolving. Keep educating yourself, stay up to date with market news and be willing to adapt your strategies when necessary. You can use your demo account to test out strategies and get a feel for the markets before implementing your trading approach in a live environment.
To become a day trader, you can start by choosing a broker and setting up an account that allows active trading. Some important factors to take into consideration when making your decision include the markets, hours and tools offered by the broker. We offer share trading and contracts for difference (CFD) trading and you can practise CFD trading on a demo account using virtual money, without risking any real money.
To set yourself up to trade comfortably, you can use a powerful computer and multiple screens. Additionally, fast internet will help enable quick trade execution. Once you've taken care of all of these, you can plan how you'll fit market analysis and trading into your schedule.
It's important to be prepared for challenges. For example, the short duration of trades can be mentally exhausting and small mistakes can become costly.
While you can mitigate your losses using risk management tools such as stop-losses, it's also important to keep learning from both profitable and losing trades. By drawing up a trading plan and refining your strategy when you see fit, you're increasing your chances of favourable outcomes.
You can also aim to mitigate your trading risk by deciding on a maximum percentage of your total capital to risk per trade, eg 3%.
That said, it’s important to keep in mind that day trading isn't for everyone. Longer-term investing, ie buying and holding, can be useful if you’d like to gain experience before diving into the fast-paced world of day trading – in general, it’s also less risky and less time-consuming.
As a day trader, you'll have access to a wide range of markets. Each offers unique opportunities and challenges:
Employing certain strategies and risk management techniques can help increase your probability of success in day trading. Here are some popular day trading strategies:
Risk management is crucial for protecting against significant losses and helping to preserve your capital. Key strategies include, but aren’t limited to:
You can buy or sell shares, currencies, commodities or other securities over the counter (OTC) using CFDs on our award-winning trading platform1 that’s suitable for day traders. You’ll find advanced charting tools, real-time news feeds and customisable layouts on all our platforms.
Here are some steps to get you started:
Which markets are suitable for day trading?
Popular markets for CFD day trading include stocks, forex, commodities and indices. These markets often have high liquidity and volatility, providing ample opportunities for short-term trades.
What is day trading and how does it work?
Day trading involves opening and closing positions within a single trading day with the aim of profiting from short-term price movements. Traders use various strategies and technical analysis to identify potential opportunities and execute trades quickly.
What do I need to start day trading?
To start day trading, you'll need several key elements, including:
If you're new to day trading, consider opening a demo account first. This allows you to practise your trading strategy and familiarise yourself with our OTC trading platform using virtual funds ($20,000 to get started) without risking real money.
1 Best Finance App, Best Multi-Platform Provider, Best Platform for the Active Trader and Best Online Stockbroker as awarded at the ADVFN International Financial Awards 2025.