Day trading platform in South Africa
Depending on the duration, there are short-term, medium-term and long-term trading.
Short-term trading involves day trading, or, as it is often called, day trading.
Day trading is a trading strategy that involves making short-term trades during the day in order to make a profit. This means that day traders usually open positions during the day and close them in the evening, without leaving open positions overnight.
This trading strategy is popular ahead of scheduled financial announcements, such as when companies present their earnings and quarterly reports.
The term "day trading" encompasses short-term trading in securities - often for a few seconds, minutes, or at most a few hours. This makes day trading very different from traditional stock and bond trading. The time horizon is usually weeks, months or years.
To engage in day trading, you need certain knowledge, skills and, of course, a high-quality trading platform that provides all the necessary tools for this type of trading.
This article focuses on the topic of day trading and what constitutes a day trading platform in South Africa.
Day trading involves a variety of time frames. On the one hand, traders position themselves when the stock market opens, hold stocks all day, and sell them before the market closes. At the other extreme is computerized high-frequency trading, where milliseconds or microseconds pass between buy and sell. There are many variations between these extremes.
High-frequency trading is completely controlled by computers that are constantly looking for price differences in different markets or certain patterns in the market. Trades can be as short as microseconds or milliseconds. The profit is small, which is offset by extremely high trades.
An example of high frequency trading is when computer programs look for differences in the prices of stocks that are traded simultaneously on several different exchanges. Any differences result in quick buys and immediate sell orders at slightly higher prices. Today this form of trade is in the minority.
This type of trading is often criticized and cited as one of the factors leading to stock market crashes.
This phenomenon has both positive and negative sides. On the positive side, it increases liquidity on the exchange and reduces commissions and spreads. On the negative side, this creates a market with very large and rapid price movements.
As defined above, day trading is when you focus on short-term trading and short-term positions that close before the market closes.
Another option for day trading is intraday trading.
This form of trading is used by day traders who speculate in stocks that fluctuate a lot. Equilibrium stocks move up and down like waves in the ocean. When a stock is low, the trader buys at the open and sells before the market closes. All stocks fluctuate periodically, but the frequency of the fluctuations varies greatly.
There are 2 main strategies for intraday trading: scalping and intraday news trading.
Trading on the news
Trading news involves speculating on future news. For every news item there is an expected number against which the market is compared. If the news is better than the expected number, it is positive, even if the expected number itself is bad.
Speculation exists before and after news releases. If expectations are high, the price may start to rise even before the news is released. There is often a "rally" after news releases if there is a big difference between expectations and outcome. It also often happens that the price first moves in one direction and then reverses. A very difficult situation arises when several news are released at the same time, especially if some news are positive and some are negative. The trader needs to keep a close eye on all financial and economic news that may trigger a trend movement, especially positive news. The trader will be helped by a calendar of important events in the stock market and a chart showing how these events affect currency rates.
Scalping is a trading strategy designed to profit from small movements in stock prices. Traders who use this strategy make several to several hundred trades in one day, relying on small price movements; traders who use this strategy are called scalpers. Many small profits can easily turn into large ones if you use a strict exit strategy to prevent large losses.
Day trading requires quick decisions, and you must consistently make small profits. A common investment strategy is to profit from long-term price fluctuations, while day trading is considered the opposite.
A day trader is a trader who completes his trade on the same day without carrying it over to the next day.
In day trading, it is not enough to study theoretical aspects. Since this type of trading requires a lot of concentration and constant involvement in the process, it is considered quite stressful. Therefore, the psychological side is very important. In day trading, it is important to be able to concentrate and keep track of five or fifteen minute stacks. Skills such as stress tolerance, the ability to make quick decisions and self-discipline are important here. You need to be collected and focused, have a high resistance to stress, be able to work at an extremely fast pace and not react to short-term setbacks.
It is very important to accept losses as a natural part of trading. Learning from losses means developing a trading strategy. It is easy to make mistakes, and if you are not careful about risk management and are inconsistent in your decisions, losses will grow.
It is completely wrong to start day trading with the aim of making big profits. The positive returns of successful day traders consist of many small wins and many losses, but the losses are smaller compared to the wins. The money you don’t lose is as valuable as the money you make. Therefore, you need to make sure that your losses are small and manageable.
The day trader, like no other, should be well versed in technical and fundamental analysis.
What is a day trading platform?
All trading is done through an online trading platform. Therefore, it is important to choose the right broker - your financial intermediary in the investment market.
You should only choose a licensed broker who provides access to a platform that provides all the necessary tools for day trading.
Due to the strong competition on the internet, trading platforms are professionally programmed and offer many tools to help you.
Choose a platform that offers you the ability to trade in a variety of financial markets. Most of them you can use for day stock trading, day Forex trading, day futures trading, and CFD trading.
The platform must have technical analysis indicators.
Indicators for technical analysis
Technical analysis differs from "fundamental analysis", which is usually associated with longer-term stock trading. When you invest based on "fundamental analysis," you buy stocks because you have expectations about the future. You may have read the company's reports and concluded that the company is running a healthy business. Having bought stocks, you are ready to wait several weeks, months or years for the price to rise. The day trader doesn't work that way.
In other words: If you want to be a successful day trader, you need to be well versed in technical analysis. You must know how complex indicators work.
On the platform that we have selected as the best platform for intraday trading in South Africa, you will see a variety of technical analysis indicators. It is important that you become familiar with how each one works. To do this, you need to try various indicators that show price movement in a new way, but the most important thing is to keep practicing. The more price charts you look at, the easier it will be for you to see patterns, and the more likely you will one day succeed.
Day trading and CFDs
You now have the opportunity to choose trading platforms specifically designed for day trading. On some of these platforms, you are not trading the physical stock of the company in question, but rather entering an online broker that reflects the price of the asset you are trading.
CFDs also allow you to trade at lightning speed and "buy" and "sell" in the market at the same time. As a day trader, you don't have to worry about whether the market will go up or down if you want to win. If you go short, you can make money even if the markets fall. It may sound daunting, but modern online brokers are easy to use. To open a position, just click the "buy" or "sell" button. This means that CFD trading is more or less similar to regular stock trading, and the trading platform organizes all the "paperwork" associated with CFD trading.
However, we recommend that you familiarize yourself with how CFDs work. The risk associated with such trading is higher than when investing in ordinary equity securities.
Using stop orders
Day trading is very dynamic. Some trades, as we said above, can last only a few minutes or even seconds. Imagine that at this time you need to go on a trip urgently or have technical problems with your Internet connection. Therefore, traders use automatic stop orders such as stop loss or take profit to protect themselves from such incidents.
A stop loss is a predetermined level at which a trader wants to sell his security. As the name suggests, it is used to limit losses. You set your stop loss at a certain level because you calculated in advance that this is a good price to sell your security. This is an effective way to reduce your losses. There is no guarantee that your broker will be able to sell or buy at this exact price, but it is usually better than nothing.
Take profit is a type of a pending order for a broker to close a deal when the price reaches a certain level - profit. When the price reaches the take profit level, the trade is automatically closed and the profit is fixed.
Take Profit and Stop Loss help hedge a trader's market position in any situation. Regardless of the volatility or connection to the broker's server, your positions will be closed at the levels you set.
Additional benefits of the day trading platform
Modern online trading platforms allow you to track even the smallest changes in the market by displaying the movement of asset prices on graphical images of quotes. Charts can be customized to your liking by opening one or more windows at the same time to compare different time frames. For example, you can select a time interval of 15 minutes in one window, half an hour in the next window, and an hour in the next window. Up to 9 windows can be opened at the same time.
Moreover, you can customize the chart parameters according to your preferences, not only in terms of the time interval, but also in terms of design - you can choose between histograms and candlestick charts, as well as change the color scheme of the chart as you like best.
Another plus is the availability of a mobile version of the platform. You can follow the market wherever you are using only your mobile phone. The mobile version offers the same capabilities as the web version.
The platform fully and comprehensively informs you about all market movements - even the smallest chart deviations are immediately visible to you.
How to start day trading on the platform?
To start doing day trading in South Africa, you need to:
- Choose a broker;
- Register on the online trading platform;
- Open an account.
We have already talked about what points should be considered when choosing a broker. Registration on an online trading platform is the easiest process that does not take much time, and you complete all registration steps online without visiting the offices of brokerage companies. Just go to the broker's website, check the "Register" option, enter your name and email address in the registration form. After the standard registration confirmation procedure at the indicated email address, your account will be ready for use.
On the platform, you can use a demo account for practice. Take this opportunity. This is good practice without the risk of losing money. Just click on the "Activate Demo Account" button and $ 10,000 will be loaded into your virtual account. This is fictitious money - spend it on test operations to test your trading skills before risking real money.
Activate a real account by depositing money into it. The minimum deposit amount is only $10. To fund your real account, use one of the funding options offered on the platform. You can use a bank card or online payment system of your choice. You can then use the same options to withdraw money from your account.
Advantages and Disadvantages of Day Trading
Day trading involves a fast pace of work and is often stressful, so it requires a lot of composure and perseverance. The goal is to choose the right moment to trade, as with many other strategies.
Like any other strategy, intraday trading has its pros and cons. The ability to avoid disadvantages and multiply the advantages of a strategy is what distinguishes a professional trader.
The disadvantages are as follows:
- The more transactions you have to make in a day, the more effort it takes. And a decent profit can be obtained only if you make a large number of transactions;
- Day trading requires constant concentration, the trader must keep his finger on the pulse of the market, react to the slightest changes, and there is not much time to analyze the situation and the trader in this situation;
- A large number of transactions often leads to high commissions.
Most of the inconvenience is caused simply by the dynamics of work and nervous tension, which often worries the trader. For those who are able to work in this mode, the tactics have several advantages:
- Risk control;
- Absence of "gaps" (significant gap between prices);
- The indisputable advantage of short-term trading is that profits appear much more often, although not always on a large scale;
- Intraday trading allows you to quickly see the results of your activities;
- In short-term transactions, smaller amounts are usually involved, which means that in case of failure, the trader's losses are not so great.