For buy-and-hold investors, day trading may sound silly. Why would anyone want to buy a stock or any other financial instrument and sell it the same day? One reason is that there’s money to be made. It may not add up to much over the course of a day, but it can be very lucrative over time.
In this article, WealthRocket ranks three of Canada’s best day trading platforms. Below, we’ll review candidates for the best day trading platforms and provide a crash course covering day trading basics.
|AvaTrade / Friedberg Direct
|Downloadable trading platform
|Mobile trading app
|Contracts for difference (CFDs)
|Available across Canada
Below are some of the best day trading options available to Canadian citizens. Learn more about who they are, how they work, their advantages and disadvantages, and more below.
Forex.com provides access to more than 200 markets, including foreign exchange pairs, stocks, commodities, stock indices, and metals. The company also offers various day trading platforms. Here’s a look at each one and what it has to offer:
- Advanced trading. This downloadable platform offers streaming and interactive charting with access to more than 80 technical indicators and 15 timeframes, integrated trading strategies with more than 100 templates that are customizable, and a fully customizable dashboard with drag-and-drop windows.Speaking of windows, this Forex.com platform is only available for those with a Microsoft Windows operating system.
- Web trading. This is a fully customizable platform with advanced charting features, including over 70 technical indicators, more than 50 drawing tools, and the ability to trade from charts. The platform uses a design that suits all web browsers and operating systems.
- Mobile trading. When you’re on the go, you can trade on your mobile phone. This platform offers full trading capabilities with multiple order types, advanced charts by TradingView, integrated news and analysis, and real-time trade alerts and notifications. The app is available for both Android and iOS devices.
- MetaTrader 4. MetaTrade 4 is one of the most popular trading platforms. While this isn’t owned by Forex.com, you can get access to news from Reuters, Forex.com research, and Trading Central technical analysis. There’s also MetaTrader Expert Advisors, which are programs that allow you to make automatic forex trades, with mobile apps available for both Android and iOS.
To open a standard account (which allows you to use any of the platforms above), it’s recommended that you have a balance of $1,000.
If you want a direct market access account (which uses all the trading platforms except for MetaTrader 4), a balance of $25,000 is recommended, and the minimum trade size is $100,000.
- Account Fees $15 inactivity fee
- Min Deposit $100
- Mobile App Yes
2. AvaTrade/Friedberg Direct
AvaTrade offers forex, commodities, stock, and options trading. To use AvaTrade, you have to open an account with its Canadian partner, Friedberg Direct. Many of Friedberg’s trading platforms are powered by AvaTrade. Here’s an overview of those platforms:
- Web trading. This allows you to make new trades and check open trades without having to download any software.
- MetaTrader 4. Like Forex.com, MetaTrader 4 is offered by AvaTrade/Friedberg Direct. Its features include one-click trading, 30 built-in indicators, direct trading from charts, and news streaming.
- MetaTrader 5. This is an up-to-date version of MetaTrader 4, but also offers more timeframes, built-in indicators, pending order types, and much more.
- AvaOptions. This allows you to trade more than 40 currency pairs as well as any combination of call and put options. There are also professional risk management tools and portfolio simulations. This is available on both desktop and mobile.
- Mac trading. You can trade commodities, stocks, and indices on a Mac using the MetaTrader 4 platform. You can make trades over the web or through the platform when you download the software.
To open an account, it’s recommended that you be employed and make more than $25,000 annually, have savings of more than $25,000, and set a loss limit (the amount you’re comfortable losing without affecting your lifestyle) of $5,000.
- Account Fees $50 - $100 inactivity fee
- Min Deposit $250
- Mobile App Yes
3. Fusion Markets
Fusion Markets offer forex, energy, precious metals, equity indices, and share contracts for differences (CFDs). There are several platforms that Fusion offers:
- MetaTrader 4. This is the industry standard for forex trading so it’s no surprise that it’s also offered by Fusion Markets. Both Windows and Mac versions are available for download.
- WebTrader for MetaTrader 4. You can also trade through your internet browser on a computer with a Windows, Mac, or Linux operating system.
- MetaTrader 4 mobile apps. These allow you to open or close a position, use the most popular analytical tools, and much more. They’re available for both Android and iOS devices.
- Multi Account Manager. If you’re a professional and manage money for clients, this platform allows you to trade an unlimited number of accounts.
- Myfxbook AutoTrade. This is a social trading platform, which allows you to follow and copy traders through the forex trading community called Myfxbook.
- DupliTrade. This lets you copy the actions of some successful DupliTrade traders with a proven track record.
There’s no minimum required to open an account, but Fusion Markets says the average client starts with about $1,500. If you live in Ontario, you’re out of luck. Unfortunately, the broker doesn’t serve residents of the province.
- Account Fees Zero Account Fees
- Min Deposit $0
- Mobile App Yes
4. Interactive Brokers
Interactive Brokers allows you to trade stocks, bonds, options, currencies, and funds. There are a number of different trading platforms that are offered:
- Client Portal. This is the web platform that allows you to access many tools and features to monitor your account. You can place orders, manage open orders, and see recent trades from any page using the slide-out menu. There’s also the ability to get detailed quotes, create customized advanced charts, and stay on top of relevant news
- Trader Workstation. This platform is for sophisticated traders. It’s customizable and offers access to comprehensive trading, order management, and portfolio tools. You can also get real-time news, research, market data, and monitoring. And there are more than 100 order types and algorithms you can access. This trading software can be downloaded for free and is available for Mac, Windows, and Linux.
- IBKR Mobile. You can trade stocks, options, futures, futures options, and foreign exchange wherever you go with the IBKR Mobile app. You’ll also be able to access more than 130 markets around the world. And you can get the same market-moving information as the Trader Workstation platform. The app is available for both iOS and Android devices (smartphones or tablets).
- Trading APIs. With Interactive Brokers’ trading APIs, you can do more. There are three different APIs: Client Portal API, which is the most basic; Trader Workstation API, which allows you to build your own trading application and automate trading strategies; and the FIX connection, which is for institutions and allows users to create trading systems.
Interactive Brokers doesn’t have investment minimums to start trading, but there are monthly fees if you don’t reach the minimum commissions threshold or have less than $100,000 in your account.
- Account Fees Tiered pricing based on volume, fixed pricing per share or as a percentage of trade value
- Minimum Deposit $0
- Asset Types Global stocks, Options, Mutual funds, Hedge funds, Futures, Bonds, Gold, Currencies, Forex, Cryptocurrencies
- Trade Fees $0
Questrade allows you to trade options, stocks, currencies, contracts for difference (CFDs), and much more. It has many types of trading accounts, including margin accounts. The online brokerage offers four different trading platforms:
- Questrade Trading. This web-based platform allows you to trade from anywhere. You can access real-time data and research, set up watchlists and instant notifications, and use different charting tools. Questrade Trading is available on computers with Windows, Mac, and Linux operating systems as well as Android and iOS devices.
- Questrade app. Trading on the go is easier with the Questrade app. The features and tools are similar to what Questrade Trading offers except it’s on an app. The app is only available on Android and iOS devices.
- Questrade IQ Edge. If you’re a serious trader, Questrade IQ Edge is for you. This is a downloadable desktop trading platform and it’s free. You can easily analyze stock charts and data, screen stocks, set up alerts, create advanced trading orders, and customize the windows in the platform. Questrade Edge is only available for Windows and Mac.
- Questrade Global. This is the flagship trading platform for forex and CFDs. There are a number of tools and features, such as live charting with annotations, watchlist personalization, and instant notifications with customized email and pop-up alerts. Questrade Global works on computers running Windows, Mac, and Linux. There’s also a separate app for Android and iOS devices.
While there’s no minimum required to open a Questrade account, you do need at least $1,000 in your account to begin trading. Check out our Questrade review for more information.
- Account Fees $0
- Minimum Deposit $1,000
- Asset Types Stocks, Options, Bonds, ETFs, Mutual Funds
- OTC stock fees $0.01 per share, min $4.95, max $9.95; free ETFs, selling costs $0.01 per share
What is Day Trading?
Day trading is the act of buying and selling a financial instrument (such as a stock, exchange-traded fund, option contract, currency, or commodity) usually within the same day.
The most common type of day trading most people are most familiar with is stock trading. However, people do day trade other financial instruments.
At one point, day trading was only for large brokerages or major financial institutions. However, it took off with smaller investors in the late 1990s when online stock trading became mainstream.
How Does Day Trading Work?
A trader will buy an asset and then sell it sometimes within minutes or hours of the purchase.
The key is that the purchase and sale happen on the same day. Additionally, you usually don’t hold any investments except for cash when the trading day is over.
There are a variety of strategies that day traders use. Some of the most common are:
Buying a financial instrument as the price trend increases and selling when the trend declines.
Profiting from small changes in price by making multiple trades.
Making buy and sell decisions based on the trading range of the financial instrument.
Making trades based on news and events that can lead to movements in price.
What is a day trading platform?
Day trading platforms are operated by online brokerages. The brokers have a variety of trading tools for those who want to day trade.
Some brokers offer different platforms such as mobile, web, and advanced trading platforms.
What are the Rules of Day Trading in Canada?
In Canada, there isn’t a minimum amount required to day trade stocks. However, there is a US$25,000 minimum in the United States. If you want to trade American stocks, your brokerage may require you to adhere to that minimum.
There aren’t any specific rules for other financial instruments, but the broker you choose may have rules regarding foreign exchange (forex), options, or futures.
However, there are certain tax rules you should keep in mind. Regular investors who trade in a non-registered account are subject to the capital gains tax.
As a result, 50% of the gain is taxable at their marginal tax rate. On the other hand, day traders’ gains are considered business income, and 100% of profits are taxable at their marginal tax rate.
While regular investors are allowed to claim capital losses to offset capital gains, day traders can’t claim capital losses, but they’re allowed to deduct 100% of their losses.
Also, trading fees aren’t tax deductible for regular investors, but day traders can claim them.
If you decide to day trade in a tax-free savings account (TFSA), you may be considered carrying a business by the Canada Revenue Agency. As a result, you will have to pay tax on the income earned in the account.
How To Be a Better Day Trader
Day trading may sound like a quick way to make money, but there are some certain rules some traders follow. Here are just a few tips:
1. Know and understand what you’re doing
This should be obvious, but for the amateur investor, it can spell disaster.
You should be able to read charts, conduct technical analysis, and perform due diligence on the products you want to trade.
2. Be disciplined
You need to have discipline and not get carried away when making trades. If not, you can make silly mistakes and suffer major losses. Avoid making impulsive decisions.
3. Be decisive
When an opportunity arises, you have to make a decision fast and not panic. Otherwise, you can miss out and lose money.
4. Have money you can afford to lose
Day trading isn’t for the faint of heart. Make sure you’re comfortable with losing the money you’re trading with. You shouldn’t be using your emergency fund or savings for your child’s education.
5. Don’t risk more than 1% or 2% of your balance
It’s recommended that you invest only what you can afford to lose. That means if you have $50,000 in your account, you should only risk $500 to $1,000 on a trade.
6. Have a strategy
As mentioned above, there are several day trading strategies. Refine a strategy until you’ve created a system that works best for you.
Common Day Trading Mistakes
To state that day trading is easy would be a lie. It’s actually very difficult, and even the most experienced trader is bound to make mistakes.
Here are just a few common mistakes day traders make:
1. Being unrealistic
Day trading is hard, and not everyone will get the hang of it. An estimated 80% of day traders fail within the first year. Compared to the number of new businesses that start and fail in their first year (about 5%), day traders perform much worse.
2. Not having a plan
Day traders should have some sort of plan in place before they begin trading. You should determine what financial instruments you want to trade and how much money you plan to trade with. You’ll also need to decide what equipment is required, what training and services you require, and what will be your benchmarks to determine whether or not you’re successful.
3. Making big bets
A big bet is a lot like gambling, and you can lose a lot. Making smaller trades is the way to go because you don’t want to lose more than you can afford.
4. Trading too much
It’s easy to track one or two positions at a time, but not dozens. Trading a lot of stocks or other financial instruments simultaneously will make it even more difficult to monitor what you’re doing and could lead to some mistakes.
5. Selling your winners too late/quickly
Sometimes traders hold onto their winners for too long, which means their profits shrink. Other times, they may sell too fast and miss out on potential gains. Your emotions may take hold, and you may be too afraid to make a move. One solution is to set target prices for when to sell.
6. Holding onto your losers
Hoping a losing position will turn around is a bad move. Hope isn’t a strategy. It’s an emotion that can cause you to lose more money than you planned.
7. Averaging down
When an investment loses 10% of its value, it needs to rise 20% in order for you to recoup any losses. If you put more money in, the investment doesn’t need to rise as much to cancel out those losses. But not all investments rebound. And it can be riskier with day trading because of the short amount of time you hold a position and the additional money you’re investing.
8. Trading hot stocks
Hot stocks have momentum, and they can go in either direction fairly quickly. You can make a lot of money, but you can also lose a lot. After a while, some of the hottest stocks become cold. They lose their momentum, and trying to make money off them becomes harder.
9. Not managing risk properly
Any sort of trading involves risk, but there are ways to reduce your risk. One way is to use stop orders, which buys or sells securities when the market price hits a certain value. This will protect profits and limit your losses.
10. Not practicing enough
Practice makes perfect. You can spend weeks or months reading and learning about day trading, but it’s not enough. Try using a practice account first before you actually start day trading to get an idea of what it’s like. Some practice will help you prepare for the real world.
Our Final Thoughts
While Canadians don’t have access to TD Ameritrade, TradeStation, Schwab, or Fidelity for their day-trading needs, there are a number online brokers to choose from that have sophisticated platforms, including the ones mentioned above.
Forex.com, AvaTrade/Friedberg Direct, and Fusion Markets are best known for currency trading, but Interactive Brokers and Questrade are primarily known for trading stocks.
What makes Interactive Brokers and Questrade unique among the five brokerages mentioned is that they also offer registered accounts such as registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). If you want to keep all your investments with one institution, having an account with one of these two brokers will make that a lot easier.
One thing to keep in mind when trading U.S. stocks is that you may be deemed a pattern day trader depending on your trading habits. If you make four or more day trades within a period of five business days, it will appear that you exhibit a pattern of day trading. As a result, you may be forced to comply with the Securities and Exchange Commission’s rules and have at least US$25,000 in your account.
While there are many trading options to choose from, the best day trading platform will be the one that’s easy to use, has the features you’re looking for, and suits your needs.
Frequently Asked Questions
Yes, day trading is legal in Canada. That said, there are rules that need to be followed. Most importantly, investment income earned (or lost) by day trading is treated as business income (or loss) for tax purposes – not capital gains. This means your profits (you can deduct commissions and other expenses) will be taxed at your marginal income tax rate.
Unfortunately, you do have to pay taxes on any profits earned. As a day trader, the gains you make aren’t considered capital gains—which are taxed at 50% of your marginal tax rate.
Instead, any profits earned are considered to be regular income and taxed at 100% of your current rate.
While it’s called day trading, trades can take place at all hours of the day or night.
That’s because markets in Asia and Europe, commodity and currency markets, and other markets are usually open for business.
That means you can take part in day (or night) trading for up to 24 hours a day. Although, you may want to try to get some sleep.