Day Trading in the United Kingdom | How to Start Day Trading Today

Last Updated September 4th 2020
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Day trading in the United Kingdom is a popular trading style. Learn more about trading within a single day and how to start day trading today.

Wondering what it’s like to practice day trading in the United Kingdom and how to start day trading today? Day trading is a popular trading style in the UK - one of the most influential trading and financial centres across the globe.

What Is Day Trading?

So, what is day trading? Even though trading is not rocket science, before you start day trading in the UK, you should have a profound knowledge of the trading world in general. Day trading, in particular, is defined by experts as any trading activity in a single trading day.

In other words, day trading allows traders to execute different trades during the day but requires them to close out their positions before the market closes.

The main goal is to make a profit by capitalising on small price changes in different assets throughout a single trading day. Because of its active nature, day trading requires fast decisions and up-to-date data.

What Assets Can Day Traders Buy and Sell?

Did you know that international trading started approximately 3,000 BC, when people started exchanging precious goods and spices? Given the fact that trading is one of the oldest human activities, we can’t be surprised that trading attracts more and more people from all over the globe.

Day trading, in particular, is an extremely exciting trading practice that allows traders to buy and sell different assets within a single day. Day trading is a great opportunity to avoid the risks of overnight market changes and costs.

Take forex trading, for example! The forex market is defined as one of the most popular and liquid markets in the world. With a variety of trading currency pairs (including exotic pairs), there are numerous short-term opportunities for day traders to explore.

Cryptocurrency trading, on the other hand, is marked by high volatility and growth, which makes it a great option for day traders.

Let’s not forget that trading stocks, indices, futures, and commodities intraday is also an attractive investment option in the UK, which reduces the notorious gapping risk in trading or when overnight news may cause prices to change.

The Difference Between Day Trading and Swing Trading

When it comes to trading in the UK, there are many trading styles to choose from. For example, while some active traders choose to dive into the world of day trading, others prefer to start swing trading. But what is the difference between day trading and swing trading and how can one get started?

While both styles are highly popular and aim to time the market in the short-term, there are some differences. For a start, day traders do not like to hold positions overnight and prefer liquid assets with high volume. After all, day traders value volatility and choose assets that are sensitive to news and speculation. Swing traders, on the other hand, can hold positions for days or even weeks.

Here we should note that scalping is also a popular trading method in the UK. Scalping is an extreme form of short-term trading characterised by quick executions and small price changes. Many scalpers may enjoy making a few pip gains in minutes on a single move, for example.

The good news is that you - and only you - can decide what trading style to explore!

What Do You Need to Know About Day Trading in the UK?

day trading in the uk

Still wondering if day trading is for you? No need to wonder anymore! Day trading in the UK has numerous opportunities to offer - after all, the UK is one of the world’s leading financial centres

Forex trading, in particular, is increasing in popularity across the UK and has become the backbone of trading worldwide. According to data, there are around 405,160 online traders in the UK, and these numbers are rising.

Yet, depending on how and what you trade, we shouldn’t forget there are different regulations for taxation. Note that trading activities in the UK can be usually classified into three categories (each with different pros and cons): speculative (free from tax), self-employed (liable to pay business tax), and private investor (under the capital gains tax regulation).

To provide an example, if you decide to trade forex in the UK as spread betting, you don’t have to pay tax.

How Can I Start Day Trading in the UK?

Once you’ve understood the basics of day trading and the way it’s regulated in the UK, it’s time to get started. Here are some steps that can take you on a trading journey to success.

1. Focus on trading education:

One of the first steps, before you invest in day trading, is to invest in proper trading education. From online courses to coaching sessions, one can explore different resources to understand the complexities of the world of finance. Learn about technical and fundamental analysis, sign up for different courses and webinars, and do not hesitate to join social groups with like-minded people! The good news is that in today’s tech-driven world, traders can find a bunch of online resources for free. We at Trading Education are here to guide you through your learning journey to success.

2. Trade reliable equipment:

Trading has evolved significantly over the centuries, with online trading becoming the backbone of trading today. Though you don’t need a fancy computer to start day trading in the UK, you need enough memory and fast connectivity to be able to track price changes and news throughout the day. Two monitors, on the other hand, can help you track different indicators and tame the market. Be prepared to spend a lot of time reading indicators in front of a screen, so create an enjoyable work environment! Even if you get bored staring at your screen, do not allow boredom to ruin your strategy.

3. Find a reliable platform and a reputable broker:

It’s not a secret that you need a reliable platform to start day trading in the UK. Make sure to find a reliable platform with a calendar of news events, social trading tools, and any other support you might need. Some platforms may even offer minute by minute charts which can boost your trading capacity. When it comes to trading brokers, always choose a regulated broker to help you get started. Check what capital is required to get started day trading in the UK as well. The great news is that there are different accounts to choose from and one can start trading with as little as £100!

4. Practice, practice, practice:

To start day trading in the UK, one should decide what assets they want to trade within a single day. Experts suggest focusing on one market first and developing a strategy. For example, as stated above, forex trading is highly popular in the UK. Beginners are also often encouraged to consider virtual trading. Experts advise that when one reaches 60% success on a demo account, they can start practicing day trading with a real account. Practice, practice, practice! Give yourself some time to master a strategy, with refined entry points, stop-loss, and exit plans.

5. Understand risks and embrace losses:

Many traderss turn to day trading in the hope of making money. Okay, okay - experts agree that day trading might be profitable. To provide an example, expert traders claim that if one makes just five moves a day with a 1% profit, they may actually make over 20% gains by the end of the week. With a reasonable leverage rate, you might even make 100% profit. That said, this scenario is not common because day trading comes with a lot of risks. Day traders should understand risks and embrace losses. Do not forget two of the main rules in trading: never risk more than 1% on a trade and invest only money you can afford to lose!

6. Learn to control your emotions while trading:

Though day trading allows you to be your own boss and eventually make a profit, you shouldn’t forget that day trading is tough and risky. To become a successful day trader, one has to develop healthy trading habits and discipline. There’s no place for fear, greed, or euphoria in trading. Consistency and emotional self-control are crucial to success as these qualities can help you cope with losses and uncertainties. Be realistic! Realistic expectations can protect you from your intense emotions – just like a good umbrella can shield you on a rainy day in London.

Day Trading Strategy for Beginners

strategies for day trading in the uk

Day trading is an exciting journey that can lead to success only when one develops a suitable trading strategy. Here we should note that establishing a strategy depends on a trader’s personality, goals, and assets. Do you want to practice day trading or do you want to hold assets for a long time? Do you rely on small profits or do you aim for a one-time big move?

What works for some, might be a nightmare for you. In the end, there are no generic strategies and one-size-fits-all moves in day trading.

To provide an example, some strategies require the use of leverage, while others depend on an in-depth analysis of fundamental indicators, such as candlestick charts and moving average convergence.

Day trading strategies vary significantly, allowing traders from the UK and the rest of the world to choose a strategy that suits their trading goals and preferences. Some common day trading strategies include buying the dips, trend trading, fading, and momentum. Learn more about day trading strategies here.

No matter what day trading strategy you choose, you should learn to accept both wins and losses. Invest in adequate risk management! Evaluate your losses, keep a trading journal, and take a break if needed. Apart from hard stop losses, create mental stops to help you deal with risks and uncertainties in order to enjoy day trading.

Is Day Trading in the UK for Me?

Day trading in the UK is a popular trading method that allows traders to increase their wealth and make a name for themselves.

That being said, though ordinary people can make money by day trading in the UK, this financial endeavour is not for everyone.

Day trading comes with many factors to consider, including the market’s liquidity, trading volume, and volatility. As explained earlier, day trading requires a lot of time, analysis, and resources, so it’s not exactly for the part-timer.  To be successful, one has to be devoted to their trading strategy and financial goals.

If not, the chances to fail are high; in fact, according to data, 90% of traders lose money and quit. Be part of the top 10% instead!

Key Points:

  • Day trading is a popular trading practice in the UK and the rest of the world.
  • Day trading involves trading assets within a single trading day to avoid overnight risks and funding costs.
  • Depending on their preferences and goals, day traders can trade stocks, forex, cryptocurrencies, and many more assets.
  • Day traders should invest in proper trading education to be able to tame the market, develop a successful trading strategy, and master the art of trading psychology.
  • Beginners who want to start day trading in the UK can consider different strategies, including scalping, trend trading, and fading.  

While it’s easy to start trading online, it takes a lot of time and devotion to understand the market and its volatility, volume, and liquidity.

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Rememer: CFDs are complex instruments and come with a high risk of losing money due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

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