How To Become A Day Trader In Australia: A Complete Guide

Students want to know how they can become day traders in Australia.

 

Do you have self-discipline, emotional control, and an analytical mindset? Do you like analysing price movements, volume, company performances and forming trading strategies?


Day traders are investors who engage in frequent buying and selling of currency, futures, commodities, options, indices, cryptocurrency. They make profits from short-term price fluctuations of these financial instruments.

You do not need any formal qualification to learn how to become a day trader in Australia. However, it is good to attend trading classes or courses to obtain trading education. This article is a guide to learning about the skills and duties of a day trader and the steps to become one.

 

If you don't have a trading account yet, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

 


1. What Is Day Trading?


Day trading involves the trading of financial instruments with the objective to square off your positions by the end of the day’s trading session to book profit from movements in price.


This strategy mitigates risks associated with carrying overnight positions, particularly when the market is highly volatile.


Day trading is a full-time daily job wherein traders need to study market movements closely and form quick decisions.


Intra-day trading requires focus, fast decisions, emotional control, 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 that are 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?


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 center. The country boasts of a flourishing financial market with over 2100 publicly traded companies in the commodities, and technology sector.


Established in 1987, Australian Security Exchange is the main stock market in Australia and the 10th largest stock exchange throughout the world. It deals in officially listed government issues, 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 that regulates 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 both local and international trading instruments with great ease.

 


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 major 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 flexibility to day traders to execute trades from their home, office, or even during traveling and 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 investing a small amount. This technique helps traders amplify their returns.

 


Great Earning potential


When done strategically and with discipline, day trading can help anyone make a lot of money without undergoing any formal qualification.

 


4. What Can You Trade In Day Trading In Australia?


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

 

  • Forex or the foreign exchange currency market where you will trade in currencies such as the Aussie Dollar, Euro, and U.S dollar. 

  • Stocks, including physical stocks in individual companies, regular and leveraged Exchange Traded Fund”, stock options, and futures.

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

  • Binary Options

  • 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 method to trade in index funds is through exchange-traded funds that are traded on the Australian Securities Exchange (ASX). As index funds are slow financial vehicles, very 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 engage in buying and selling multiple assets in relatively large volume one or multiple times in the same day. The main objective is to make the most of intraday market price action to generate profits.


Basic steps that a trader implements in intraday trading are as follows:

 

  • Analyse the market, that includes liquidity, trading volume, and volatility

  • Determine a trading plan based on a specific candlestick chart pattern, etc.  

  • Formulate a risk management strategy

  • Open a trade position (long position or buy trade, short positi on, 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 that 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 seem to be an affordable option than full-time brokers for intraday traders who takes multiple trades in a day and pay a fixed charge for each trade.

 


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


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


Traders often enter the market in hopes of making quick money and find it interesting when the market is in the bull phase.


However, they fail to survive when it transits into the bear phase. This propels them to exit the market in fear and book hefty losses.

 

This is why only a few percentages 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 has to do a lot of calculation and computation to understand the market and arrive at the right trading strategy.

 

Mathematics skills greatly help to analyze price movements, moving averages, volumes, key ratios, and study balance sheet 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 take wrong trades 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 that is subjected to market fluctuations has some risk associated with it. Day trading is one such investment.


Despite implementing the appropriate trading strategy, you may start incurring losses. This is when you need a proper risk management strategy in place. Keeping strict stop losses will help you curtail losses and still stay in the game.


A day trader must know that market runs on sentiments of people who are fast to react to anything that they disagree with or dislike. A market that was running in an upward trend may suddenly start a downward movement in reaction to any sudden news (example: Covid 19, annual budget, etc).


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

 


Courage and Acceptance


Surprised why 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 strategies/trades may go wrong.

 

A good trader accepts his occasional failure and stays strong 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, 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 market scenarios, factors like a crisis that impacts the markets for the short or long term, inflation, trends, charts, economic data, quarterly results, etc. 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 the 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 at the time of initiating a trade. This is a good practice as they automatically exit their position after achieving decent profits without craving for more.

 


8. Steps To Become A Day Trader In Australia


If you possess the above skills and are serious to make a day trading career, then here is the pathway to help you accomplish your career goal:

 


Step 1: Learn About Financial Markets And ASX


Lack of trading knowledge can lead to irrecoverable losses. That’s the reason aspiring traders must ensure complete familiarity regarding the trading of selected financial instruments.


Begin by building a strong 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, its trading hours, best trading time for intraday, margin requirements, leverage, exchange holidays, and more.

 


Step 2: Learn Technical Analysis


Take your learning a little further by understanding the type of instruments that 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, Fibonacci series.


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


You can also find online several resources that can help you get an introductory knowledge about trading such as podcasts, blogs, books, e-books and audiobooks, YouTube videos, online day trading courses, pdf guides, seminars, message boards, forums, and newsletters.

 


Step 3: 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 capital to take more trades.

 


Step 4: Learn and Practice Day Trading Strategies


A beginner trader can’t master every intraday trading strategy. The right course is to pick two to three time-tested strategies. Practice implementing these strategies by taking paper trades (that doesn’t involve actual money).


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

 


Step 5: 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 in one trade. This is because, if that stock/sector doesn’t perform for whatever reason, then you will either have to book your loss or wait till you achieve your target price.


The right way to invest and trade in the financial market is to not risk over 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, then the order gets automatically executed and you exit the trade.

 


Step 6: Form A Trading Plan


Not that you know about day trading strategies, and risk management, you should start making a trading plan that 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 7: Find a Brokerage


Several Australian brokers provide a trading platform (website/tablet/mobile) to enable traders to execute trades by paying a fixed (per trade) charge to them.

 

Day trading eToro is one of the largest online trading platforms providing trading access to 25 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 is one of the most popular trading platforms worldwide, including in Australia.

 

A day trader can take as many trades in a day provided that he pays the trading charge for each trade executed via the trading platform. That’s why brokerage is an important factor to look at when choosing a broker.


Besides it, you need to access a few more factors to select 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

  • Efficiency of their service to ensure that their software doesn’t hang due to server load etc.

  • Facility to Invest in US Stocks

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

  • Permitted withdrawal modes and charges

 

Having done the research now is the time to create an account with the day trading platform.

 


Step 8: Learn How To Use The Platform


After making an account with the broker, learn how to place buy and sell orders, stop-loss orders, view charts, withdraw funds, etc. using the platform.

 

Once you have reached this step, you can now start to trade in the Australian Stock Exchange.

 


Step 9: Start Trading

 


As an inexperienced trader, it is advised to start with a small amount and practice entering and exiting orders, and applying strategies. Once you become proficient, you can increase the stake.

 


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 for beginners in Australia:

 

  • eToro - Best Overall Trading App (Our Recommendation)

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

  • AvaOptions – Best Day Trading Platform for Options Trading

  • Plus500 – Best Day Trading App for CFD Trading

  • 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:

 

 

The following zero brokerage trading platforms don’t charge a commission fee to trade in US stocks:

 

  • eToro (Our Recommendation)

  • IG

  • Superhero

  • Stake

 

However, you still need to pay a conversion fee to exchange AUD dollars to USD dollars and pay a custody fee and ongoing account fees to use this facility.


Alternatively, you can also invest your money in a portfolio of US stocks through the following Australian exchange-traded funds that are 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, it is important to choose a broker that is authorized and regulated by the Australian Securities and Investments Commission.

 


How much does a day trader earn in Australia?


The exact amount of day trader 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 a smaller capital earn comparatively lesser than the ones trading with a larger capital.


Day traders who are employed in a reputed private or public firm, earn a regular salary and enjoy Medicare benefits, and recognition. If you work for an investment firm, you can make anywhere 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 just document the journey of real-world traders but also share their trading and investing strategies, and tips such as the mental discipline, psychology of trading, etc. that made them successful day traders.


Here are the most recommended for budding 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 are not willing to take considerable risks or lack funds, then the below tips will help to trade in the financial market.


To trade with $100, you need to choose the right trading strategy, select the right broker and trading account, and follow the 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 $100 or less. Look for the one that charges you based on spread instead of commission. It charges you as a built-in fee based on your trade amount.

  • Leverage becomes highly desirable when you trade with a small amount. As per the updated ASIC regulations, brokers are now allowed to give maximum leverage as 30:1.

  • Choose financial options that offer higher volatility so that you can capitalize on price movements and make good profits even with a small investment. Currency is the best option for small capital traders as it offers the highest volatility to traders in Australian and global markets.

  • As your capital is only $100, you need to keep strict stop losses to keep your losses low and retain your capital. 

  • Starting with a demo trading account could be an ideal way to familiarize yourself with a trading platform and trade for just $100. Later, as you increase your trading capital, you can upgrade your account to higher versions.

 


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.

 

Some of the best websites to trade in cryptocurrencies are CEX, Coinbase, Kraken, ShapeShift, Bitstamp, Bitsquare, Poloniex, Binance, Gemini, and Localbitcoins

 

  • 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 are not going to use for at least 6 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 important to understand the tax consequences to buy, hold, and sell 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:

 

  • 0-$18,200: Nil$

  • 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

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

 

 

In the case of a company:

 

  • Tax-free threshold is not applicable

  • The full 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 fulfill the conditions prescribed for the indexation method.

 


Conclusion


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 continuously learning, patience, and emotional control that will help make wise decisions and earn monetary and professional success.

 

If you don't have a trading account yet, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

 

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