Trading in the UK

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Table Of Contents

Today, day trading is increasingly popular in the United Kingdom. More and more traders prefer to open and close positions within a single day. Here is an overview of the style and its key advantages. 

Traders based in the UK may benefit from adopting the day trading method. The United Kingdom is a global financial centre. The trends it sees are replicated in other regions. So, what makes this style so incredibly popular?

Definition of Day Trading in the UK

As the term suggests, day traders limit the scope of their activity to a single trading day. This style is not terribly complex, but it does require certain expertise. You need a special arsenal and skills to spot the best entry and exit points within this scenario. 

Any position you open must be finalized before the trading day is over. From the opening to the closing bell, you may place as many trades as you wish. The key is not to leave any positions open overnight. To make decisions, traders need a reliable source of up-to-date figures, efficient platforms and brokerage.

The goal is the same as for other strategies — profiting from price dynamics. Traders capitalize on minor movements in various assets within the scope of a single day. This means that day trading is not limited to currencies. This fast-paced framework applies to stocks and other tradable instruments. 

Assets Used for Trading in the UK

If you thought that trading was a modern concept, you will be surprised. Humans started trading thousands of years ago. In fact, the first known examples date back to 3,000 BC. This is when our ancestors began exchanging goods and spices. 

As trading is so old, it is a natural activity. Its popularity in the digital age is hardly surprising, as technology makes it so much easier. Trading of virtual assets is accessible all over the world. In the UK, the army of its avid followers is growing every day. 

This style is one of the most thrilling ways to trade. Within a single day, different assets may be bought and sold, bringing profit to both parties of a transaction. The timescale means that results are quick.

Unlike swing traders, you do not wait for days or weeks to collect a profit. At the end of each trading day, you may have new achievements to be proud of. Of course, if you follow a robust strategy. 

Another advantage is the absence of overnight trades. Those who let their positions remain open for several days have to pay a special fee to the broker. For day traders, there are no such costs. So, what can you sell when trading in the UK? 

Trading in the United Kingdom

First, there is Forex. The global currency exchange is the largest financial market worldwide. Its daily turnover reaches 5 or 6 trillion US dollars, according to different estimates. Retail traders act alongside institutions like big banks and hedge funds. 

There are three categories of currency pairs: Major, Minor, and Exotic. Each can be lucrative when traded wisely. As the market is also the most liquid, buyers and sellers have no difficulty connecting online (unless they work with the rarest instruments). 

These are the basics of what is Forex. To a day trader, this market presents a wealth of opportunities. Short-term swings are observed throughout the day. There is a lot to explore. 

Trading in Bitcoin UK

Cryptocurrencies are marked by significant volatility. This means that prices may see dramatic changes during the day, which may work to your advantage. Traders need a profound knowledge of volatile markets, as their extreme shifts also magnify risks. Still, trading in bitcoin UK is possible. 

In the United Kingdom, other investment options are stocks, commodities, market indices, and more. All these assets may be part of intraday trading schemes. This means you can grow a diverse portfolio without worrying about overnight news affecting your investment.  

The Difference Between Day Trading and Swing Trading

These are two major avenues of trading in the United Kingdom. So, what does the ‘swing’ refer to, and who style suits you best? Discover key differences below. 

First, both modes are focused on short-term changes in the market for the chosen instrument. This is where the similarities end, though. While both groups of traders may use the same software and analysis tools, their strategies have little in common. 

First, day traders do not leave trades open overnight. They focus on volatility, choose liquid instruments and significant volume. They opt for assets that are most sensitive to news and actions of market participants. Day traders prefer to wait for days or weeks until the perfect exit opportunity arises. 

The scalping style is also worth noting, as it is popular among UK-based traders. This is, essentially, day trading taken to extremes. Individuals look out for momentary changes, executing multiple trades per day. Each may bring modest profit, which is why quantity is important. For instance, a single move may bring a profit of just a few pips. Each position may last seconds. 

If you are not sure if this style suits you, here are a few facts about the size and robustness of trading in the United Kingdom. First, trading is legal as long as you work through a regulated broker. If you don’t know how to open a trading account in the UK, it is easy — just register on your brokerage site. There are multiple opportunities to consider, as the country is an important financial hub.

The next question is, “is Forex trading tax-free in the UK?”. Taxation is an important consideration, as it may eat into trading profits. In the United Kingdom, trading is taxable or not depending on its category. Each has its own benefits and drawbacks. 

  • Speculative trading is exempt from tax.
  • Self-employed trading entails a business tax.
  • Being a private investor falls within the scope of the capital gains tax regulation.

For example, retail Forex is interpreted as spread betting. This is because traders essentially bet on the direction of the market. Therefore, no tax is imposed. “Is Forex trading legal in the UK?” is a common question, and the answer is positive.

The Forex trading community is the backbone of trading around the world. In the country, it is going strong. Recent estimates say that currently, almost half a million people — 405,160 — trade online Forex in the UK, and the figure is growing. 

How Can I Start Day Trading in the UK?

Now that you know the background, let’s get down to business. How to do Forex trading in the UK? The same way you would do it in other countries. If you were to do Forex trading in Indonesia, for example, your steps would be similar. 

1. Learning as Much as Possible:

Before funding a live account, find reliable sources of FX education. There are free options, and paid courses are worth investing in. Learn to navigate the complicated world of finance by learning from pros. Try different formats: webinars, articles, coaching, etc. 

Begin by delving into fundamental and technical analysis. Register on trading forums and join communities on social networks. Today, there is no shortage of information online. 

2. Finding the Right Tools 

Over the past centuries, trading has seen revolutionary changes. Today, its internet-based segment is the largest. You can trade on any PC, laptop, or even a mobile device as long as there is sufficient memory, and the internet connection is fast enough. It is vital to have instant access to live quotes and the latest news. 

Generally, you may consider using two screens at once. This way, you can track different indicators more easily. Create a comfortable work environment, as you will spend a lot of time in front of those monitors!

3. Finding Brokerage and Software

When choosing a platform, pay attention to features like news calendars, support, and social trading. The most detailed charts (e.g., minute by minute) may prove extremely useful for a day trader. 

Not all brokers are equally trustworthy. Choose a company that is authorized by a reliable industry organization. Only regulated brokers are worth considering. Different types of accounts have different capital requirements. Compare different offers to find the best one. Generally, you can start at just £100 in your account!

4. Practice Makes Perfect

To begin, you have to know what to trade daily. Rookies are advised to zoom in on a single market first. Get used to the day trading system and build a solid strategy for the instrument. For instance, Forex is a good start. 

Newbie traders should first work in the demo mode. Generally, real trading is not recommended until you reach at least a 60% success rate in Forex trading training in the UK. The majority of your virtual trades must be profitable. Take your time and do not rush it. You need a clear roadmap with entry and exit strategies, stop loss, etc. Check our Forex entry guide for useful tips.

5. Evaluate Risks and Accept Losses

How much do you expect to earn? Make sure your target is reasonable. According to experts, only 5 moves per day with a 1% profit may add up to 20% return by the end of the week. When trading on margin, this figure may reach 100%. However, day trading in the UK is risky, and such spectacular profit goals are almost impossible to reach. 

Understand that losses will be encountered. They are an organic element of trading. It is simply impossible to have only winning trades. Do not use the money you cannot afford to lose, and risk no more than 1% of capital per trade.

6. Learn to Control Your Emotions

Talented day traders are their own bosses, as they are entirely responsible for the results. However, success does not come to everyone. You need resilience and discipline to make money. Strong emotions, be it fear or excitement, can mess up your trades. 

Do not let feelings cloud your judgement. Self-control and consistency are crucial. They will help you overcome losses and stay the course against all odds. Expectations must be realistic — do not expect to earn a million overnight!

Day Trading Strategy for Beginners

Before embarking on this thrilling journey to financial freedom, do your homework. It is the cornerstone of success. Bear in mind that no universal system exists. Every trader should choose a strategy based on their own traits, goals, and resources. Do you need ‘chunky’ or small but steady profits? How much time can you devote to trading per day? 

For instance, some strategies include leverage. Although attractive, this magnifies risks big time. Other systems require in-depth analysis of fundamentals like interest rates or GDP. What is the most convenient?

In general, day trading can be approached in different ways. Traders are free to choose a system that works for them personally. You may buy the dips, trade trends, trade the news, etc. Learn more about the most common strategies here

Risk analysis is vital. Accept losses, but also limit the risks. Traders are advised to keep a trading journal, so they can review performance easily. Sometimes, you will need to take breaks when the market seems to be against you. Have a comprehensive risk management system in place. Both hard stops and mental stops are important. 

Is Day Trading in the UK for You?

To sum up, day trading is a popular way to monetize knowledge in the United Kingdom. It allows you to grow your wealth and build a finance career. Still, it is not everyone’s cup of tea. You need a special mindset, skills, and tools to succeed.

Never lose sight of your goals in the process. You will fail at least occasionally, which is perfectly normal. The vast majority of traders wipe out their deposits and quit. Becoming one of the winners is feasible but challenging. 

Be prepared to devote a lot of time to day trading. Multiple factors should be considered: volatility, liquidity, volume, etc. A part-timer can hardly cope with this amount of analysis.

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Updated  November, 2020

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