Do you have self-discipline, emotional control, and an analytical mindset? If yes, you should become a day trader.
Day traders are investors who frequently buy and sell shares, currency, futures, commodities, options, indices, and cryptocurrency. They make profits from short-term price fluctuations of these financial instruments.
This article is a guide to learning about the skills and duties of a day trader and the steps to becoming one.
eToro is a leading stock broker charging zero brokerage for stock trading. The trading platform offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders.
The platform also provides fractional share trading and virtual money if you are not confident enough yet to use real cash. It is ideal for beginners and advanced traders.
1. What Is Day Trading?
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. Who Is A Day Trader?
Day traders use a variety of trading strategies to benefit from small movements in currencies or high-liquidity stocks.
Day traders follow a specific set of strategies meant for daily base trading and not for investment. These include fading, daily pivots, momentum, and scalping.
3. Why Should You Become A Day Trader In Australia?
Are you looking to become a day trader but unsure whether it is right for you?
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 in the commodities and technology sector.
Established in 1987, 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 options, stocks, stock index options, futures, traded options, Forex, agricultural, metals, silver, gold, and other commodities.
The Australian Securities and Investment Commission is an official regulatory structure regulating the ASX stock exchange. The commission enforces laws to protect the interest of traders.
Furthermore, the country has several online brokerage firms that enable people to access local and international trading instruments.
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.
Web-based and mobile-based trading platforms offer flexibility to day traders to execute trades from their homes, office, or when travelling at any time.
In this way, traders enjoy complete control over their trading decisions.
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.
Great Earning Potential
When done strategically and with discipline, day trading can help anyone make money without formal qualifications.
4. What Can You Day Trade In Australia?
A day trader can choose to trade in any of the popular day trading markets:
Forex or foreign exchange currency market to trade in currencies such as the Aussie Dollar, Euro, and the U.S dollar.
Digital currencies or Cryptocurrencies like Bitcoin, Litecoin, Ethereum and Ripple.
Futures (security or commodity)
Commodities (Oil and natural gas, foods, minerals, metals)
Index funds are low-cost and low-risk investment portfolios of shares that match the pace of the stock market instead of outperforming it. The simplest and cheapest way to trade in index funds is through exchange-traded funds 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.
5. What Are The Duties Of A Day Traders?
Day traders buy and sell multiple assets in relatively large volumes one or multiple times on the same day. The main objective is to make the most of the intraday market price action to generate profits.
Basic steps that a trader implements in intraday trading are as follows:
Analyse the market, which includes liquidity, trading volume, and volatility
Determine a trading plan based on a specific candlestick chart pattern
Formulate a risk management strategy
Open a trade position (long position or buy trade, short position, or sell trade)
6. Qualifications To Become A Day Trader In Australia
To qualify and work as a day trader in Australia, you do not need to complete any formal qualification.
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.
Discount brokers are an affordable option compared to full-time brokers for intraday traders. Since day traders take multiple trades daily, a discount broker is the best option to trade at a fixed price at the lowest cost.
7. 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 Trading Platform (Broker)
Several Australian brokers provide a trading platform (website/tablet/mobile) to enable traders to execute trades by paying a fixed fee (per trade).
eToro is one of the largest social online trading platforms providing trading access to multiple exchanges worldwide. The platform offers plenty of trading and market research tools. If you don't have an account yet, you can create one HERE.
It also allows following other successful traders (social trading) and copying their strategies for a successful start. The platform is perfect for beginner and advanced traders with its easy-to-use interface.
A day trader can take as many trades in a day, provided he pays the trading charge for each executed transaction. That’s why brokerage is an essential factor to look at when choosing a broker.
Besides it, you need to assess a few more factors for selecting the right broker for your trading requirements:
Reputation and Customer Base
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 done with the research, now is the time to create an account with a day trading platform to start trading.
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
Take your learning a little further by understanding the type of instruments you wish to trade as a day trader. 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 can 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.
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).
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.
The right way to invest and trade in the financial market is not to risk more than 3% of your capital per trade.
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 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.
Step 9: Start Trading
As an inexperienced trader, start with a small amount and practice entering and exiting orders and applying strategies. Once you become proficient, you can increase the stake.
8. 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 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 coming out of the trade right once you achieve it.
Many top-day traders in Australia recommend placing a stop-loss order when initiating a trade. It is a good practice as they automatically exit the position after achieving decent profits without craving for more.
9. FAQ’s On A Day Trading Career In Australia
What Is The Best Day Trading App In Australia?
Below is the list of popular and highly efficient trading apps for day trading beginners in Australia:
eToro - Best Overall Trading App (Our Recommendation)
CommSec: Best App With Diversity of Trading And Market Research Tools
IG – Ideal Trading App for Experienced Traders
How To Day Trade In US Stocks From Australia?
Choose from the below list of Australian online share trading platforms that provides you access to US stock exchanges in Australia:
eToro (Our Recommendation)
The following zero brokerage trading platforms don’t charge a commission fee to trade in US stocks:
eToro (Our Recommendation)
However, you still need to pay a conversion fee to exchange AUD dollars for USD dollars and pay a custody fee and ongoing account fees to use this facility.
Alternatively, you can invest your money in a portfolio of US stocks through the following Australian exchange-traded funds listed in AEX.
iShares S&P 500 ETF
Vanguard U.S. Total Market Shares Index ETF
ETFs FANG+ ETF
BetaShares NASDAQ 100 ETF
The SPDR S-and-P 500 ETF
Is Day Trading Legal In Australia?
Yes, day trading is completely legal in Australia. However, choosing a broker authorized 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.
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 $50k and $70k 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 $175k in a year.
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 Become A Day Trader With $100?
Many inexperienced traders prefer to start with a small capital to gain hands-on experience and build confidence before taking large trades. If you do not take considerable risks or lack funds, the tips below will help to trade in the financial market.
To trade with $100, you must choose the right trading strategy, select the right broker and trading account, and follow the strict risk management rules:
Leverage becomes highly desirable when you trade with a small amount. Per the updated ASIC regulations, brokers can now give maximum leverage as 30:1.
Choose financial instruments that offer higher volatility to capitalize on price movements and make good profits even with a small investment. For example, trading currencies is the best option for small capital traders as it provides 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.
Starting with a demo trading account could be an ideal way to familiarize yourself with a trading platform and trade for just $100.
How To Day Trade Cryptocurrency?
Loads of volatility, incredible returns, and an uncertain future make them an exciting avenue to trade. Other attractive features of a crypto market are that it is open 24/7 and provides extreme flexibility to the traders to work part - or full-time anytime and anywhere.
Furthermore, there are over 7,000 cryptocurrencies that you can trade in the market.
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 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.
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:
18,201 to $37,000: 19c for each $1 above $18,200
$37,001 to $90,000: $3,572 plus 32.5c for each $1 above $37,000
$90,001 to $180,000: $20,797 plus 37c for each $1 above $90,000
$180,001 and above: $54,097 plus 45c for each $1 above $180,000
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.
Day trading is one of the ways to make money by investing in financial markets. For a beginner, it may look like a money machine to make quick bucks in a short time, but a careless attitude and lack of discipline can lead to huge losses as well.
To become a successful day trader, you should invest time and effort to research the market, design appropriate trading strategies and follow them religiously.
Make sure you commit to continuous learning, patience, and emotional control to help you make wise decisions and earn monetary and professional success.
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