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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.
| Features | Forex.com | AvaTrade / Friedberg Direct | Fusion Markets | Interactive Brokers | Questrade |
|---|---|---|---|---|---|
| Web trading | Yes | Yes | Yes | Yes | Yes |
| Downloadable trading platform | Yes | Yes | Yes | Yes | Yes |
| Mobile trading app | Yes | No | Yes | Yes | Yes |
| Currency trading | Yes | Yes | Yes | Yes | Yes |
| Contracts for difference (CFDs) | Yes | Yes | Yes | Yes | Yes |
| Available across Canada | Yes | Yes | Yes | No | No |
| Registered accounts | No | No | No | Yes | Yes |
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:
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.
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:
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.
Fusion Markets offer forex, energy, precious metals, equity indices, and share contracts for differences (CFDs). There are several platforms that Fusion offers:
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.
Interactive Brokers allows you to trade stocks, bonds, options, currencies, and funds. There are a number of different trading platforms that are offered:
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.
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:
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.
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.
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.
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.
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.
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:
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.
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.
When an opportunity arises, you have to make a decision fast and not panic. Otherwise, you can miss out and lose money.
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.
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.
As mentioned above, there are several day trading strategies. Refine a strategy until you’ve created a system that works best for you.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
