Day trading is a stock market transaction that was originally only for professionals. It has become more popular with private investors since trading apps have made it easier and cheaper to trade quickly and make bets on the stock market. This is because high profits can be made in a very short amount of time. With day trading, there’s one thing that most people agree on: it’s a very risky business.
Day trading should only be done by experienced investors who have strong nerves, can handle stress, and know how the stock market works. If you start day trading in New Zealand, you need to be aware of the high risks and have the right tools. In this article, we discuss about the most important things about day trading: strategies, brokers, and more.
Best Day Trading NZ Brokers
What is Day Trading
Day traders enjoy the fast pace. They try to make a lot of money from small changes in the stock market. People who are day traders try to take advantage of small price changes by quickly buying and selling stocks. The term “day trader” is actually a lie. Because with day trading, not all of the stocks and bonds are bought and sold in one day. There are many different strategies used by day traders. They may hold their positions overnight or for a long time.
On the other hand, changes on the stock market don’t just happen in one day. If a stock loses money at the end of one trading day, it can lose more money on the next trading day. If a stock loses money the day before, it may be able to get back up the next day. There is a lot more to a day trader than just one day of trading. Stocks and their indices aren’t the only things that move quickly. Among other things, professional day traders also trade foreign exchange (Forex), cryptocurrencies, and other things.
Day trading vs. investing
The classic investor looks at things like the long-term growth of an industry, a region, a company, or a technology. Anyone who invests wants to make money in the long run from good company or industry news. They want to take advantage of short- and medium-term price changes, though. Day traders, on the other hand, want to make money. The difference is in the time frame. When you invest, you think about the future and try to make money. Stock exchange prices always show what people think about the stock market. For example, when a lot of people think that a good thing is going to happen, the price of a share always goes up. The price of a security is based on what people think about it in the future.
Get to know the day trading basics
Day trading in New Zealand is very easy to do because you only need a computer or smartphone, a broker, and a little money to start with. To make sure that the money doesn’t turn into less money with a few clicks, beginners should follow a few important principles:
- A demo account is a good way for you to get used to day trading before you start real money. Most well-known providers offer this kind of access with play money. Try out some strategies and pay attention to how well you do.
- Learn about the live account before you spend a lot of money. In the beginning, you should only trade small amounts of money. Because if you run out of money, you can’t be a day trader for a long time.
- Make sure you know that in day trading, you’re competing against people who have been doing it for a long time. So, not only that, but many of your competitors aren’t individuals, but businesses like hedge funds or investment banks that use the knowledge of a lot of people when they trade. Only if you are better than these experts, or if you beat the market, will you be able to make money with day trading.
- Basically, you need to know a lot about markets to do this job. It’s better not to be an all-rounder. Then there will be people who are better at everything than you are. Each technology, industry, and region should be dealt with on its own, and you should do it often. It’s important that you stay up to date and become an expert in your field of work.
- Also, stay cool! Every now and then, you beat the market. Other times you don’t. It’s important for even day traders to let go. Once a person has a job, neither prayer nor staring at the screen will help. You can’t change the market. Do something useful with the time.
- In the beginning, do not use leverage that makes price changes double. There are times when leverage can help you make money, but when things go wrong, it also increases the amount of money you lose.
Day trading NZ strategies explained
Volatility and liquidity are the most important things to look at when you’re day trading. If the price doesn’t move, you can’t trade on it. So, day trading needs a certain amount of risk. This reduces the number of stocks or other financial instruments that can be traded on a day-to-day basis. People who are new to forex trading NZ, for example, should focus on the main currency pairs, or forex majors. It’s also important that there is enough money in the market when you’re ready to trade. Otherwise, there’s a chance that an order won’t be done at the price you want. Day trading strategies that could be used are:
- Follow the Trend : For beginners, trend following is the easiest day trading strategy. The day trader looks for strong movements with large volumes and follows the trend. The old stock market adage is: “The trend is your friend.”
- Scalping : Here the trader trades particularly quickly and a lot. He tries to “cut out” (scalping) many small profits from the market with small price fluctuations. Scalping is about seconds and minutes rather than hours or even days.
- Pullback : Here the day trader trades against the trend. This day trading strategy is not suitable for beginners as the trader must be able to anticipate a possible trend reversal.
Brokers with low fees are important for day trading
Every time you buy or sell something, you pay a lot of money for the transaction. This lowers your return. When looking for a broker, the most important thing to look for is low order fees. It’s in your favor: Costs have gone down a lot because of the fierce competition between brokers. As a result, online brokers and trading apps have slashed the price of buying shares by huge amounts. There are three main types of fees:
- Order fees: around a percentage of the order amount, sometimes with a minimum and/or maximum price per trade.
- Custody account fees: These are charged by the bank for the provision of a securities account. The fierce competition means that the majority of online brokers now offer free custody account management.
- Third-party fees : These are costs that are not incurred by the online broker but, for example, when buying shares on a stock exchange. For example, when trading in Frankfurt, the prices are 0.04 percent for DAX stocks and 0.08 percent for all other stocks.
Use demo account to learn day trading
For people who are new to day trading, it is best to start with a free demo account first. This is for people who want to learn more about a day trading company. It’s also possible to play around with the features of the software, web interface, or app without anyone else around to see what they do. Demo accounts also come with fake money that novice traders can use to trade, so they can learn how to do it. In this way, you can get some experience without putting your money at risk, and you can try out different strategies for day trading. Then you can move to the live account and start “real” trading with small amounts of money.
How much you need to start day trading in New Zealand?
Do you want to make more money out of your money? That’s a good goal. Isn’t that possible? So: Only use money for day trading that you can do without if you are not sure. If you want to start a business, you should have at least NZ$10,000 to start with. You don’t want to pay order fees, which quickly eat away at your profit.
In addition, if you don’t have a lot of money to start with, you might be tempted to buy risky securities because they could make you a lot of money even with little money invested. The problem: It’s not very likely that you’ll win. This means that it could happen that the money you have to start trading quickly runs out.
So, don’t use leverage when trading, especially when you’re just starting out. With leverage, it is possible to make a lot of money with very little money, because the money you put in is multiplied. However, leverage can also make losses bigger. You could go bankrupt if the leverage is too high, because when you use leverage, you can also lose more money than you invest. This is why it’s important to keep the leverage low. So trading with leverage is very risky and not for people who aren’t very good at making money from things.
Pay attention to taxes
When people make money in the stock market, they must pay taxes on that money. In particular, tax experts can tell you about this. In general, it can be said that stock market profits are capital gains and are taxed as such. This means that there will be a flat tax rate of 25%. Profits from day trading can be used to cover losses from stock trading. Income from work is taxed at a flat rate, which is not the case here.
People who buy and sell stocks in New Zealand pay capital gains taxes for them right away. They don’t have to do anything.