How To Become A Day Trader In Australia: A Beginner's Guide

Do you have self-discipline, emotional control, and an analytical mindset? If yes, you should start day trading in Australia and 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.

In this blog, you will learn about the skills of a day trader, the steps to becoming one, the best trading platform, day trading strategies for beginners to get started in Australia, and much more.
 

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

Buy Australian & international shares with unlimited commission-free trades. (No brokerage)

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. 

(eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

1. What Is Day Trading in Australia?

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 (day trading) and not for investment. These include fading, daily pivots, momentum, and scalping.

3. What Can You Day Trade In Australia?

Choosing a market-to-day trade comes down to what you can afford, where your interests lie, and how much time you want to invest in trading.

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.

• Stocks, including physical stocks in companies, regular shares and Exchange Traded Funds (ETFs), 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-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 (ETFs) 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.

4. 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.

_{You can find below the essential steps traders use in intraday trading:}
 

1. Analyse the market, which includes liquidity, trading volume, and volatility

2. Determine a trading plan based on a specific candlestick chart pattern

3. Formulate a risk management strategy

4. Open a trade position (long position or buy trade, short position, or sell trade)

6. How To Start Day Trading in Australia?

If you do decide that this way of investing is the right choice for you, considering the level of risk, here is a quick summary of how you can start day trading in Australia:
 

1. Research the markets you can day trade in Australia and learn how they work. 

2. Decide on a trading strategy.

3. Practice your desired strategy (This blog also discusses day trading strategies)

4. The best way is to practice with a demo brokerage account. You can sign up here for an account. Alternatively, a share market game (like the ASX game) is a good option before you trade with real money. 

5. Open a stock trading account to begin trading on live markets.

6. Keep up with trends and financial markets.

6. 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 Day Trading Platform (Broker)

The first step is to find a suitable trading platform that enables you to execute trades at a minimal cost. One of the trading platforms that you could choose is eToro.
 

eToro is the largest social online trading platforms providing trading access to multiple exchanges worldwide.

It offers plenty of trading and market research tools and charges zero brokerage for stock trading (which is amazing!). Buy Australian & international shares with unlimited commission-free trades. (No brokerage). You can create an account HERE.

The trading platform also offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders.

You can follow other successful traders and copy their strategies for a successful start. The platform is perfect for beginner and advanced traders with its easy-to-use interface.
 

(eToro Service ARSN 637 489 466 promoted by eToro AUS Capital Limited ACN 612 791 803 AFSL 491139. Capital at risk. Other fees apply. See PDS and TMD)

A day trader can take unlimited trades in a day, provided he pays the trading charge for each executed transaction, which depends on each trading platform. That's why brokerage is an essential factor when choosing a broker. (eToro doesn't charge any brokerage for Australian and international shares).

Besides it, you need to assess a few more factors for selecting 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

• 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.

If you want to proceed with eToro, you can create an account here since they don't charge any commission and brokerage for trading stocks.
 

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). We will discuss day trading strategies later in this blog.

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 Day Trading 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 (ASX).

Step 9: Start Day 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.

7. 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

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.

8. 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.

A trading platform that doesn't charge brokerage fees is best for beginners. Therefore, we recommend the trading platform eToro.

9. Day Trading Strategies For Beginners in Australia

Many people think that 'day trading' itself is a strategy, which is wrong. The term' day trading' only specifies that you don't keep a trade open overnight – it's simply a trading style. 

Below are a few valuable strategies that beginners can use for day trading:
 

Trend Trading

Trend traders study the direction of asset prices and then buy or sell depending on the direction of the trend.

If the trend is upward, with prices making a series of higher highs, then traders take a long position and buy the asset. If the movement is downwards, with prices making lower lows, traders take a short position and sell.

Day traders don't just use trend trading since you can keep your position open if the trend continues positively. However, if you strictly follow intra-day trading, close it before the day ends.

Swing Trading

Swing trading attempts to capture short-to medium-term returns in any financial instrument over a few days to weeks. Traders use technical analysis to look for new trading opportunities.

It assumes that prices never go in one direction in a trend and take advantage of short-term price movements. Swing traders try to profit from the up-and-down movements within days and weeks.

While trend traders take advantage of long-term market trends, swing traders are more interested in minor trend reversals. They try to spot these reversals quickly and trade to profit from smaller market moves.

Scalping

Scalping is a short-term trading strategy that frequently generates small profits where a trader tries to achieve a high win rate.

This strategy aims to build a successful trading account by taking smaller profits which will add up over time. Suppose you took a position where you expect the price to continue to rise. In that case, you can always stay longer in your trade and let the winner run.

However, scalping needs a rigorous exit strategy, as losses can quickly offset your generated profits. The aim is to create more wins than losses.

Mean Reversion

Mean reversion is the theory that prices and other value measures, such as P/E ratios (price-to-earnings), eventually return to their historical norm.

This strategy uses technical analysis, such as moving averages, to detect assets whose recent performance differs considerably from their historical average. Traders following the 'mean reversion' strategy take advantage of an asset returning to its typical trajectory.

Mean reversion is a financial theory speculating that asset prices and historical returns will eventually revert to their long-term mean or average price levels.

Money Flows

Traders use the money flow indicator to assess future price movements based on demand and supply. 

Money Flow calculates the standard price multiplied by the trading volume. It is the core of the Money Flow Index (MFI) indicator. Money Flow is not an indicator but a function to construct other indicators.

The indicator signals when an asset is oversold or overbought. It uses volume and price rather than solely the price of the asset.

It determines whether the money flow is positive or negative by comparing the total trades from the previous day to the current day.

If the indicator is 80 or more, it signals overbought conditions, and the trader might consider selling their position. In contrast, a reading of 20 or below indicates oversold market conditions and signals a buy.

10. Why Should You Become A Day Trader In Australia?

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.

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 large 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 homes, office, or when travelling 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 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.

10. FAQ’s On A Day Trading Career In Australia

What Is The Best Day Trading Platform In Australia?

Below is the list of popular and highly efficient trading apps for day trading beginners in Australia:

• eToro - Best Overall Trading Platform / 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:

• eToro (Best Trading Platform in Australia)

• IG Share Trading

• Superhero

• Stake

• CommSec International

• Nabtrade

• Westpac

• Interactive Brokers

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

• eToro (Best Trading Platform in Australia)

• IG

• Superhero

• Stake

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 $75k and $130k 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 $180k in a year.

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

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:

• Choose a broker in Australia, for example, eToro (You can create an account here), with a minimum deposit capital requirement of $10 or less.

• 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.

Some of the best websites to trade in cryptocurrencies are eToro, 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 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:

• 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

• 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.

11. 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 continuous learning, patience, and emotional control to help you 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.

Useful Links to Explore:

• How To Become A Commodity Trader In Australia?
• How To Become A Forex Trader In Australia?
• How To Invest Money In Australia?
• How To Buy Cryptocurrency In Australia?
• How To Buy Shares Online in Australia?
• How To Buy Gold In Australia?
• How To Buy Index Funds And ETFs In Australia?
• Top 18 Ways To Make Money Online In Australia
• Australian Grading System Explained: A Complete Guide
• Top 14 Courses That Can Lead To PR In Australia
• Top 24 + Student Discounts in Australia