Day traders speculate on short-term market moves, with the ultimate ambition of profiting from intraday action. Here, you can learn all about day trading, what it is, and how to get started. Plus we share insider tips from some of Nadex’s very own trading experts.
What is day trading and how does it work?
Day trading is a method of trading that focuses on intraday market movements. Day traders buy and sell financial instruments with a short-term focus; they don’t usually hold positions overnight. They speculate on markets day by day, trading around news and trends.
Some traders want to ‘go home flat,’ meaning they liquidate any open positions as they don’t want to risk holding them overnight. Others want to see quick results rather than buying and holding; others thrive on the thrill of fast-moving markets.
How to start day trading in six steps:
Understand your market. Do your research and know what makes it move, especially in the short term.
Make a trading plan. This will help you strategize and manage your risk.
Set up your day trading strategies. See some of our ideas below to get you started.
Open a Nadex demo account. Practice makes perfect.
Try out your strategies. You'll get $10,000 in virtual funds to try out day trading with no risk.
When you're ready for the real deal, open a live account and put your day trading strategies to work.
Day trading, like any other form of trading, is all about practicing your strategies, honing your skills, and trading in the way that suits you. Day trading can be a lucrative way to trade but it takes work and commitment, as there is also risk involved. Markets move fast – this is how opportunities arise, but it’s also important to protect yourself.
Make sure you develop a comprehensive trading plan and risk management strategy, and stay in control of the capital you put into your trades.
There’s no pattern day trader rule to contend with on Nadex, meaning you can enter positions as often as suits you. You don’t need to maintain a $25,000 account balance (which you would if you’d been identified as a pattern day trader under the rule).
As long as you have funds in your account to cover your maximum risk, you can trade with Nadex. Find opportunities 23 hours a day, five days a week. You can be a day trader, or perhaps a night trader if it suits you better, with contracts you can trade available around the clock.
Day trading strategies to help you get started
Day trading takes practice, patience, and requires strategy and discipline. Here are some strategies to help you start out as a day trader.
Trend continuation trading
Day traders look for trends to plan their next market moves. Here’s how you’d trade a trend continuation:
If a market is in an uptrend and you believe this will continue, you buy.
If a market is in a downtrend and you believe this will continue, you sell.
Indicators can help you decide when, and how, to trade.
Indicators to help predict a continuation
Fibonacci retracements. These can help you identify potential levels of support and resistance. If there is a momentary dip, they can indicate when a trend may resume. They can also help you set your profit targets.
Moving averages. Moving averages show you the average of previous candles, giving clues as to where support and resistance levels may be, and trend direction.
Moving average convergence divergence (MACD). Another type of moving average, MACD will provide buy and sell signals.
Trend reversal trading
Trends have to reverse at some point. Day traders usually look for smaller dips in a trend over a short period of time, perhaps based around financial news or other market moving events. You can also use indicators to help you decide when a trend reversal might be approaching.
Indicators to help predict a trend reversal
Relative strength index (RSI). As a momentum indicator, RSI can show oversold or overbought conditions, which can precede a trend reversal.
Fibonacci extensions. You will be able to see key levels of potential support and resistance, so you can decide if there could be a short-term dip.
Fibonacci retracements. Look for potential short-term turning points, as shown by the percentages which can provide key levels of support and resistance.
Scalping as a day trader
Scalping is the practice of taking small profits throughout the day. This kind of trading strategy works very well for day traders and might see you entering and exiting positions throughout the day.
Knock-outs trading can be great for scalping if you predict lots of market volatility. You can close your trades early if you want to take your profits, and the floor/ceiling structure will protect you if the trade doesn’t go your way.
Five-minute binary options are also popular instruments for scalping. This is the shortest contract duration offered by Nadex, and allows you to find scalping opportunities even if there isn’t much movement.
You may want to use tear-off tickets when you’re scalping. With them, you can set up a position in the opposite direction so that you’re ready to exit, either taking your profits or limiting your losses.
Bear in mind that scalping can be risky if you’re placing multiple trades on a very short-term basis. It’s essential to manage your risk carefully.
Day trading tips from the Nadex experts
Nadex is committed to educating new day traders, giving you the best possible chance of success while using our platform. Here are our top day trading tips, along with some inspiration from the resident Nadex experts.
Build your strategy first - Todd Rich, Head of Education
'Markets can move quickly – day trading at Nadex allows you to be nimble and potentially take advantage of short-term price action while still knowing you’re protected with defined risk. Do your research and create your strategy first; include both profit and stop loss levels.’
Understand the contracts you're trading - Dan Cook, Director, Business Development
'Nadex products are perfectly positioned for day trading. Binary options, knock-outs, and call spreads are available with various contract durations, giving you access to intraday opportunities with risk built in. There’s always the option to close out early too. These contracts can help you reach your day trading goals at a pace that’s right for you.’
Day trading takes practice - Adam McAden, Product and Platform Specialist
'Learn how the Nadex platform and contracts work before risking real capital. Try it out with a demo account and take it seriously – don’t fall into the trap of thinking ‘it’s just a demo, it doesn’t count.’ This is an essential practice until you are ready for the real deal.’
Join Todd, Dan, or Adam for a webinar to learn more about trading on Nadex.
Pick a day trading market carefully - Travis McGhee, Chief Commercial Officer
'Trade what you know. Stock indices, forex, and commodities markets all offer great day trading potential. Focus on a market you are passionate about – a market that will hold your interest in order for you to conduct the necessary amount of homework.
For example, if you follow names like Apple, Tesla, Google, or Netflix, perhaps the Nadex Tech 100 would interest you. Spend time learning about what makes that market move so you can develop your strategy and get into trades at the right times.’
Trade in a regulated environment - Kate Krofl, Chief Regulatory Officer and Chief Compliance Officer
'Trade on a regulated exchange to ensure a safe, secure day trading experience. Many binary options firms outside of the US are not regulated. This means you could be affected by dishonest practices or fraudulent schemes and in the case of an issue, you may have no safeguards, protection, or remedies.’
Day trading example
Day traders need to think fast and will often dip in and out of markets in reaction to changing circumstances. Let’s take a look at how this might happen with a typical binary option day trade.
You think the US 500 is going up, so you decide to buy a binary option contract at $49, meaning that $49 is your maximum risk, excluding fees. This trade is at-the-money so you have an almost equal chance of being right or wrong at this moment in time. Your maximum upside will be $51, excluding fees.
However, the market moves against you and drops to $35. You decide to liquidate your position by selling, taking a partial loss.
The market continues to drop. You want to get back into the trade as you predict a reversal, so you buy back at $20. Sure enough, the market continues to go up and you decide to sell at $50 to take your profits.
Trade 1 = $14 loss
Trade 2 = $30 profit
Net profit = $16 (excluding exchange fees)
To take the example further, if you predict the US 500 is going to make another move lower, you may decide to sell the same contract. Let’s say you sold at $45, and the market then moves down to $20. You decide to buy back at this level, making yourself an additional $25 profit (excluding exchange fees).
Day trading is often made up of these smaller moves that all form part of the bigger picture. You can buy and sell the same contracts, as in this example, or choose from a whole host of others available on Nadex. Once you try it out, you will find the markets and contracts that best suit you.
What can you day trade?
Day trading focuses on intraday market moves rather than long-term investing. Nadex products are built for successful day trading – with us, you can trade:
You can have your pick of four markets, trading in an out as you please depending on your own plan – there’s always the option to close out a trade early.
Our four market classes are some of the most popular around for day traders – we offer:
Day trading summary
If you want to be a successful day trader, you need to:
Have a plan
Commit to learning
Manage your risk
Use sensible strategies
These may be quick trades, but avoid the quick wins – each day trade adds up to form part of your wider strategy. Never lose sight of the bigger picture, take your time, strategize, and you’ll have the right tools to succeed as a day trader.
Can you make a living off day trading?
To potentially make a living off day trading, it is important to have a solid trading strategy that incorporates analysis on reasonable returns to cover your living expenses. Keep in mind, you should have strong risk management and utilize multiple strategies that adjust for different market conditions.
Day trading can certainly be a career for many who have the discipline, tools, education, and keen understanding of their trading psychology and style. The best way to get started is with a free demo account to hone your skills and learn what products and markets best suit your day trading style.
How much do you need for day trading?
For most day traders in the US, the legal minimum balance required to day trade stocks is $25,000. This is known as the Pattern Day Trader (PDT) Rule. However, Nadex is exempt from the PDT Rule. Plus, you can open a live account for free - that's right, no minimum deposit required. The cost to place a trade is always equal to the maximum risk, plus any trade fees. Not ready for a live account? Try our free demo account.
Can you day trade more than three times a week?
Yes, you can day trade more than three times a week! A pattern day trader is a person who executes four or more trades over five business days and usually must follow the Pattern Day Trader (PDT) Rule. Nadex has no Pattern Day Trader Rule and offers thousands of contracts with durations from five minutes to a week. You can trade 23 hours a day, 5 days a week. Nadex is the home for day traders looking to capture short-term forex, stock indices, and commodity market volatility.
How do I become a day trader?
To become a day trader, you must put in the time to learn and practice trading the markets. Get started by reading a guide on day trading for beginners. Next, apply what you learned by practicing on a free demo account.
Nadex products are well-positioned for day trading. Binary options, knock-outs, and call spreads are available with various contract durations, giving you access to intraday opportunities with built-in risk. With our expert customer service team and learning center, Nadex can potentially help you reach your day trading goals at a pace that’s right for you.
Can day traders hold stocks overnight?
Day traders can hold stocks overnight, although this technically would not be considered a day trade. Nadex Binary Options and Knock-Outs have weekly contract durations on stock indices markets, so you are able to hold positions overnight. Trading hours on Nadex encompass what other exchanges call regular trading hours or the trading session — traditionally the time between the opening bell and the close — as well as after-hours trading.