It is important that you know how to day trade financial assets before you risk any capital. In order to do this effectively, you’ll need to have a number of day trading strategies under your belt.
In this guide, we discuss some of the best day trading strategies to consider as a newbie trader.
In This Guide
Below you find a break down of the best day trading strategies that we will be discussing today. Be sure to read each strategy in full to ensure you get your day trading career off on the right foot!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Without a doubt, the best day trading strategy for newbie traders is to ensure you understand the market that you are planning to speculate on.
The key point here is that knowledge is key. Irrespective of which market you want to trade – be it stocks, crypto, forex, or indices, knowing the respective asset class inside out will give you the best chance possible of making consistent gains. Additionally, it’s also worth noting that you are best advised to stick with a specific niche in your chosen market.
For example, instead of trying to trade dozens of different forex pairs, it would be far better to become an expert in one or two. This is the same with stock trading, insofar that it’s best to focus on a particular exchange or market – such as the NYSE or LSE.
If you’re a complete newbie in the world of day trading – you’ll want to avoid enhanced volatility. These are assets that increase or decrease at a much faster pace than the market norm. A prime example of this would be penny stocks and cryptocurrencies. In fact, some digital currencies can move by double or even triple-digit percentages in a single day.
Trading conditions like this are going to be somewhat overwhelming if you’re an inexperienced investor. Instead, you’ll be better off sticking with assets that move in a slow and steady fashion. This might include a major index fund like the Dow Jones or FTSE 100, major forex pairs like EUR/USD or GBP/USD, or even blue-chip stocks. These assets attract levels of high volume and liquidity.
The next tip on our list of the best day trading strategies is to ensure that you understand orders. By this, we are talking about trading orders that you place with your online broker. In other words, orders to your broker what position you wish to take in the market.
One of the best day trading strategies in the context of orders is to consider using limit orders as opposed to market orders. This is because market orders are executed at the next best available price – which isn’t a good strategy to use. Instead, by opting for a limit order, you get to specify the exact price that your trade is executed at.
This means that your order will only be executed by the day trading platform if EUR/GBP hits a price of 0.86200. If it doesn’t the order will remain pending.
Make no mistake about it – day trading simulators are the best thing since sliced bread in the world of investing. For those unaware, day trading simulators are demo account platforms that allow you to trade in a risk-free environment. The best day trading simulators will mirror live market conditions.
As such, any stock price action that happens in the live trading scene will be reflected on your demo account platform in real-time. Without a doubt, this one of the best day trading strategies for becoming a better trader over the course of time.
In fact, platforms like eToro and Capital.com allow you to use its day trading demo account for long as you wish. As such, you aren’t pressured into upgrading to a real money account if you are not quite ready. An additional point to note when day trading via a demo account is to trade with realistic stakes.
For example, eToro will give you a paper trading balance of $100,000 – which you can replenish at any given time. Sure, you can enter huge stakes at $10,000 per position – but this wouldn’t be smart if you are only planning to day trade day with a few hundred dollars. As such, use the day trading simulator as if you were trading with your own capital.
76.25% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
When it comes to preserving your capital, one of the best day trading strategies to deploy is that of bankroll management. This is a simple strategy that will ensure you avoid burning through your trading account in its entirety.
To begin, you need to set yourself a maximum stake value in percentage terms.
Most traders will stick to 1% – but you can opt for a slightly higher or lower amount if you wish.
Crucially, this day trading strategy will ensure that your balance grows organically. It will also ensure that when you are going through a prolonged losing period (which happens to traders of all shapes and sizes), you protect your capital.
Ultimately, while your maximum stake in percentage terms will never change – the monetary value of each position will. In other words, when you are performing well your stake will increase in dollar terms. And, when you are going through a losing period, it will decrease in dollar terms.
If you are looking to trade but you have little experience in reading pricing charts, then one of the best day trading strategies to counter this lack of knowledge is to learn fundamental analysis. This means that you will be keeping abreast of relevant news stories that are released by the media.
Crucially, this is because real-world news will have a major impact on the value of an asset, and thus – will determine whether a market rises or falls.
Now, it’s not possible to be aware of each and every financial news story that breaks – as there will likely be hundreds throughout the day. This is why you should stick with a particular trading niche.
Additionally, it’s also a good idea to use a reliable economic calendar. This will outline key dates and times related to upcoming economic announcements. This might include anything from a central bank meeting to an OPEC production output announcement.
Many newbie traders are intimidated by the thought of performing technical analysis. However, without knowing how to read, evaluate, and interpret pricing charts – your ability to make money will be hindered.
After all, day trading positions are usually kept open for several hours or minutes – so you need to rely on analysis tools to be able to make a fast entry and exit into and from the market. In order to read pricing charts effectively, you’ll need to learn how technical indicators work.
You have over one hundred technical indicators at your disposal – each of which looks for a specific trend in the market.
Ultimately, by learning the ins and outs of many technical indicators and chart patterns – you will be able to master the craft of financial analysis. In turn, you’ll have access to a much larger pool of the best day trading strategies.
Although there is no such thing as a shortcut in the world of investing – one of the best strategies for newbies without knowledge of technical analysis is to consider automated trading. Put simply, this means that you will be intraday trading without needing to do any research or analysis of your own. Instead, everything is fully or semi-automated – depending on the strategy that you prefer.
The best two examples of automated day trading are Copy Trading and Signals – which we elaborate on in more detail below.
The Copy Trading arena is dominated by regulated broker eToro. The platform is used by over 20 million people and hundreds of thousands of experienced traders have signed up for the Copy Trading program. In a nutshell, you will be ‘copying’ a verified investor that uses the eToro platform to trade.
You will look to copy a trader that only aligns with your financial goals – but one that has a long-standing track record of making gains
Past performance is not an indication of future results
For example, in the image above you will see the historical performance of an eToro trader Christian Kongsted. This trader has performed exceptionally well since he joined eToro in early 2017. In fact, Kongsted made returns of 23% and 26% in 2017 and 2018. He also made gains of 10% and 43% in 2019 and 2020. In the first four months of 2021, the trader is in profit by 31%.
In addition to past performance, the eToro Copy Trading feature also allows you to look at metrics surrounding:
In terms of how this day’s trading strategy works – you will initially need to meet a minimum investment of $500 into your chosen investor. Then, any positions that they deploy through eToro will be replicated in your own portfolio.
Best of all, this automated day trading strategy will cost you nothing in fees or commissions at eToro!
The other automated option you have when it comes to the best day trading strategies is that of signals. This is more of a semi-automated strategy as you will be required to place the suggested orders with your chosen broker.
The main concept of signals is as follows:
There are hundreds of providers offering forex signals and crypto signals – but you do need to be diligent in the one you sign up with. This is because many providers make bold claims about how much money they can make you.
But, whether or not this is the case, remains to be seen. As such, if you do opt for a signal service – we would suggest reverting back to Strategy 4 – where we discuss the importance of using a day trading simulator.
The general rule of thumb with seasoned day traders is that you should never keep a position open overnight. Instead, most traders will look to make quick and modest gains throughout the day – keeping positions open for a matter of hours or even minutes via a scalping strategy.
However, one of the best day trading strategies to consider is that you should not be afraid to be flexible. That is to say, there is nothing wrong with keeping a position open for more than a day.
In fact, this is the smart thing to do if you believe that you have identified a trend that you believe will remain in place for several days or even weeks. Sure, this would translate into a swing trading strategy as opposed to a conventional day trading system. But, being flexible in the investment world is important.
Just remember – if you do keep a day trading position open overnight – you will need to pay funding fees. The only exception to this rule is if you are buying a traditional asset like stocks, bonds, or ETFs and the instrument isn’t in the form of a financial derivative (e.g. CFD).
Last but certainly not least – one of the best day trading strategies to conclude with – is to ensure that you choose a suitable broker. There are many factors that you need to focus on – such as the broker’s regulator standing, supported payment methods, and customer service channels.
However, from the perspective of a day trader – it’s crucial that you choose a broker that offers super-low fees. The reason for this is simple – the vast majority of day traders will look to make modest gains – whereby positions might remain open for minutes or hours.
Of course, there is only so much that an asset can increase or decrease in such a short timeframe – which is why potential profit margins are conservative.
As a result of this, your chosen broker must offer:
Starting with commissions, this is the fee that you will pay to your broker to enter and exit the market. For example, if you stake $500 and the broker charges a commission of 0.5% per slide – you will pay $2.50 to enter the market. Then, if you decide to close your position when it is worth $550, your commission will amount to $2.75.
Now, although this might not sound like a lot – it is. After all, suppose that you entered a quick day trade that resulted in a profit of 0.6%. This is a good outcome for a couple of hours’ worth of work. But, the vast majority of your profit would be eaten away at by the 0.5% commission you paid to both enter and exit the market.
This is why – as we cover in the section below, we prefer brokers like eToro, Robinhood, and Capital.com – as they charge a commission rate of 0%. As such, these platforms are highly conducive for the best day trading strategies that we have discussed today.
On top of commissions, you also need to have a firm grasp of what spreads you will be paying. If you’re new to this term, the spread is simply the difference between the buy and sell price of an asset.
For example, if the difference is 1% – this means that your broker makes 1% from the trade irrespective of which way the markets move. In other words, when your day trading position is open, you need to make 1% just to break even. As such, you’ll want to choose a commission-free broker that offers super-tight spreads.
It’s time to consider which platform is best suited for your needs. This is the difficult part – as there are hundreds of day trading platforms that are all vying for your business. To save you from having to personally review hundreds of brokers – below we review a selection of the very best day trading platforms for 2021!
We have mentioned eToro a number of times in this guide on the best day trading strategies that work – and for good reason. Put simply, eToro is by far the best day trading platform in the online space. The broker is used by over 20 million clients and it allows you to trade in a 100% commission-free manner.
Not only that, but eToro offers some of the tightest spreads in the day trading space – and opening an account is quick, easy, and free. In terms of supported markets – you’ll have thousands to choose from at eToro. This includes 18 digital currencies – which is perfect if you are looking to deploy the best crypto day trading strategies. You can also trade stocks from 17 different exchanges.
This includes markets in the US (NASDAQ and NYSE), as well as London, Amsterdam, Frankfurt, Paris, Hong Kong, and more. ETFs and index funds are also supported. The latter covers some of the most liquid indices in the space – such as the Dow Jones, S&P 500, FTSE 100, and NASDAQ Composite. If you’re looking at using the best forex day trading strategies – eToro supports 49 currency pairs across the majors, minors, and exotics.
You can also trade heaps of commodities – including everything from gold, silver, and oil to natural gas, wheat, and sugar. The minimum stake per trade is $25 and $50 on other financial instruments. eToro also offers a fully-fledged day trading simulator that comes pre-loaded with a $100k balance. You can use this for as long as you wish, to perfect the best day trading strategies that we have discussed on this page.
And of course – we couldn’t review eToro without discussing its industry-leading Copy Trading tool. As we covered earlier, this allows you to fully automate your day trading strategies by mirroring the positions of an experienced investor. When it comes to funding, eToro supports debit/credit cards and bank transfers. You can also deposit funds with Paypal, Skrill, or Neteller. Everything is done by the book at eToro – as the broker is regulated by the FCA, CySEC, and CySEC.
Capital.com is an online broker that allows you to trade thousands of CFD instruments. This covers everything from forex and precious metals to stocks and cryptocurrencies. All markets on the Capital.com platform can be traded with leverage. Plus, as you are engaging in CFD trading - you can go long or short on your chosen instrument.
This top-rated day trading platform is another provider on our list that allows you to trade commission-free. We also find that on major markets - Capital.com has some of the best spreads in the industry. If you're a newbie trader, you'll be pleased to know that Capital.com offers a fully-fledged demo account facility. This can be accessed as soon as you open an account - which should take you no more than a few minutes.
When it comes to real money deposits - the minimum here is just $20. You can fund your account easily with a debit/credit card, bank wire, or an e-wallet. Capital.com is also ideal for inexperienced day traders as it offers lots in the way of educational materials. This includes courses and webinars, guides, and even videos. The CFD broker is regulated on multiple fronts - including a license with the FCA and CySEC. Take note, US traders are unable to use Capital.com.
71.2% of retail investors lose money trading CFDs at this site.
If you're an American and searching for the best day trading platform - you might want to consider Robinhood. This platform gives you access to several popular asset classes - including over 5,000 stocks and ETFs. Most of these assets are US-listed - so you'll be trading equities on the NASDAQ and NYSE.
In addition to stocks and ETFs, you will also have access to several digital currencies. As such, if you're looking to use the best crypto day trading strategies discussed today - Robinhood is a great option. If you have a bit of experience in the world of day trading - then you might also consider the options department at the broker. This allows you to placed leveraged positions on stock options at the click of a button.
When it comes to day trading fees - this is where Robinhood really stands out. This is because - and much like eToro, you will not be charged any trading commissions when you enter and exit a position. There is no ongoing platform fee either and deposits and withdrawals are free when using ACH. If you wish to purchase stocks on margin - you can do this by upgrading to the Robinhood Gold Account - which costs just $5 per month. This also gets you access to higher instant deposits.
Your capital is at risk.
This comprehensive guide on the best day trading strategies will conclude by showing you how to get started today. In fact, by following the simple step-by-step walkthrough below - you will be day trading at commission-free broker eToro in less than 10 minutes!
Opening a day trading account at eToro takes no more than 5 minutes. Simply visit the eToro website, click 'Join Now', and follow the on-screen instructions.
You will be asked to provide your:
You also need to upload a copy of your government-issued ID - as per KYC laws. However, you don't need to do this right now - as long as you are not depositing more than $2,250.
Now it's time to make a deposit. If you want your payment process instantly - choose from one of the following deposit types:
If you opt for a bank transfer/wire - it might take a couple of days to process. With that said, eToro also offers instant bank deposits - but this will depend on where you live.
Not sure which financial instrument you wish to day trade? If so, click on the 'Trade Markets' button and browse the many assets that eToro supports.
Or, if you know which market you want to speculate on - search for it. As you can see from the image above, we are searching for Disney stocks.
You now need to deploy your chosen day trading strategy by setting up an order. If you need a refresh on how day trading orders work - scroll back up to Strategy 3.
Once you have set up your limit, stop-loss, and take-profit orders - you need to enter your stake in the 'Amount' box.
Finally, click on the 'Set Order' button to place your day trading position!
In conclusion, this guide has discussed 10 of the very best day trading strategies that work. We have also discussed the importance of choosing a good day trading platform - especially when it comes to low commissions and tight spreads. Additionally, you'll also want to ensure that the broker offers a top-rated day trading simulator.
If you're looking to deploy some of the best day trading strategies discussed today - eToro is a great option. It takes just minutes to set up an account, you'll have access to thousands of markets, and you won't pay a cent in trading commissions. Most importantly - your funds are safe at eToro - as the broker is heavily regulated.
Perhaps the best day trading strategies that work are to start off with a demo account facility - meaning you can trade in a risk-free manner. Additionally, you should also consider learning the art of technical analysis.
If you're looking for the best crypto day trading strategies - one would be to stick with major pairs like BTC/USD or BTC/ETH. This will ensure that you are trading markets with high liquidity levels and thus - tighter spreads. Additionally, one of the best crypto day trading strategies to also consider is to avoid applying leverage.
If you're looking for the best forex trading strategies, consider learning technical analysis. Although this will take many months to master - this will give you the best chance possible of outperforming the market. Other popular forex day trading strategies to consider is signing up for a signal service, or deploying an automated robot.
If you are a complete newbie and have no understanding of technical analysis - the best day trading strategy could be the eToro Copy Trading tool. This is the best day trading strategy for beginners because you don't need to do any analysis or research. Instead, you simply need to copy an experienced trader and all ongoing positions will be mirrored in your eToro account - like-for-like!
We found that one of the best day trading strategy ideas for newbies is to enter positions when an important news story breaks. This is known as fundamental analysis - and it will see you deploy a buy or sell order depending on whether the news was positive or negative.
We found that he best day trading platform is eToro - as the broker is heavily regulated, offers thousands of financial markets, and it doesn't charge any commissions.
Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Kane has also written for websites such as MoneyCheck, InsideBitcoins, Blockonomi, Learnbonds, Buysharesand the Malta Association of Compliance Officers.
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