Trading during the day means focusing on short-term positions that are closed before the close of the stock market. The ones that do this are often called day traders and don't have positions open overnight.

Many people believe that day trading is good for the stock market because it serves as a lubricant for stocks, which is necessary for the stock market to be efficient.

A good example is that day traders increase market liquidity and make it easier for all traders on the exchange to find a counterparty to trade on.

Day trading is an investment method with excellent financial efficiency and risk management. The investment method called day trading has two main characteristics. The first is to "complete the purchase and sale of shares on the same day and not carry over the position to the next day." The other is "repeatedly buying and selling the same funds during trading hours." 

With these two features, day trading allows you to trade with most of the risk limited to stock price fluctuations, and you can accumulate profits even with a small amount due to the efficiency of the funds.

Contrary to popular perception, day trading is an easy investment method for beginners, even with a small amount of money, due to its high capital efficiency and ease of risk control.

In this summary we will present the basic knowledge necessary to start day trading in Kenya, including its characteristics, attractiveness and differences with other trading methods.

Day trading platform in Kenya
Day trading platform in Kenya

Day trading

Daily trading, also known as intraday trading, refers to a trading strategy in which a financial instrument is bought and sold on the same trading day.

In other words, intraday trading is a trading strategy in which a position is opened and closed during a trading day or even several times on a specific day. A trade that was opened one day and closed the next day is not considered a daily trade.

In general, day trading is a speculative trading method used by day traders and is designed to take advantage of small intraday price swings to generate large profits over time.

Day traders focus on a security's short-term price movement, rather than its long-term potential.

Day trading does not involve "night risk" because the position does not carry over to the next day, and most of the risk can be traded limited to stock price fluctuations.

The "overnight risk" (carry risk) is the risk that occurs when the price of the shares moves to the next day. It is the downside risk of a stock that many investors experience. Day trading, which completes the process from order to settlement during the trading hours of the day, has the advantage that it is not affected by internal and external economic indicators and corporate indicators announced after such operations are closed. In other words, day trading allows you to trade most of the risk by focusing solely on fluctuations in the stock price. On the other hand, in the case of medium and long-term investments, the longer the holding period of a share, the greater the exposure and risk of share prices, such as fluctuations in interest rates. and of exchange rates and the risk of bankruptcy of companies, as well as national and foreign economic indicators.

Choosing the expiration time of trading
Choosing the expiration time of trading

There are different strategies for day trading.

Trading in a trend means buying when the prices of the securities are rising or selling short when the securities are falling. Trend trades are performed under the assumption that prices will continue to rise or fall.

Scalping is a style of trading in which a trader uses small changes in price to make a profit. This strategy is accomplished by rapidly entering and exiting a location in a matter of minutes or even seconds.

News-based trading occurs when a trader buys when there is positive news, or sells when there is bad news. This can lead to higher volatility and create opportunities with higher profits or losses.

Counter reversal is a trading strategy in which some traders intentionally go against current market trends, buying financial instruments when others are selling, and selling when most others are buying.

Day trading is a risk strategy. Even if a trader can accurately predict stock price movements, the gains from price movements can be offset by transaction fees.

News feed on the platform
News feed on the platform

Day Trader

A day trader is a trader who completes his trade on the same day without carrying it over to the next day.

The biggest difference between day trading and long-term stock picking is the psychological aspects. If you work with day trading, the mental pressure is concentrated in a shorter period of time than that which usually occurs in traditional stock investing. The pressure leads to fear and bad or, in the worst case, disastrous decisions that are immediately reflected in the account. Stock investors also act less rationally under pressure, but are often unaware of their actual losses because the outcome of a trade takes a relatively long time to clear up.

To be a day trader, you have to have qualities like focus, concentration, high stress tolerance, the ability to work at an extremely fast pace, and not react to short-term setbacks.

Many people who want to make money in the stock market think that it is easy and that all they have to do is find a strategy, and then increase their positions when the profit increases and after a while you will get rich. The truth is that it is not that simple. It is a profession and, like any profession, it requires a lot of learning. Reading a book or an article on the Internet will not make you a day trader. It requires constant self-education and the acquisition of new knowledge in business. The stock market and markets around the world are constantly changing, and what worked yesterday may not work today or tomorrow. Always try to stay one step ahead. There are many lessons and training courses on trading, so if you have set out to learn about trading, you can easily find all the information you need. Also, if possible, try to surround yourself with experienced operators and communicate with them whenever possible. 

Day trading markets

There are many financial markets that offer day trading opportunities. Each market has its own dynamics and it will take time to learn and understand the pros and cons of each market. Therefore, at least for a beginner, it is preferable to familiarize yourself with the market and start trading.

Ultimately, your choice will depend on what is comfortable for you, but also what you can afford.

The most popular markets of the day today are:

  • The foreign exchange market (Forex) is the most liquid financial market in the world and the one that requires the least capital to start operating.
  • Futures markets require more money than the forex market to open a trade position, but less than the stock market. In futures contracts, you buy or sell an underlying asset, such as a commodity or a stock index.
  • Stock markets are more capital intensive. The deposit required to start trading on the day depends on the requirements of your broker.
  • Stock markets are more capital intensive. The deposit required to start trading on the day depends on the requirements of your broker.

Day traders will not have to actually hand over the assets they trade or make cash settlements when futures contracts expire.

Popular trading markets
Popular trading markets

Platform for Day Trading

An online broker facilitates your operations and provides you with a broker in the investment market in exchange for a fee or commission. Choose a licensed, transparent, and trustworthy broker who charges reasonable fees and who is able and willing to help you with your trading problems. The broker will provide you with an online trading software to transact over the internet.

There are numerous investment platforms available for day trading. Your broker will surely offer you to test the platform with a demo version. If you are not satisfied, try several and choose the one that best suits your trading style. Remember that you can change your online trading program several times during your trading career. Your platform should definitely include charting software, as well as a set of tools necessary for quality daily trading. Also, the platform should be fairly user-friendly, informative, and updated in real time. You should prefer platforms that have a mobile version it is convenient and you will be able to trade anytime, anywhere with just a mobile phone.

Day trading platform
Day trading platform

How do I sign up for the online day trading platform?

Signing up is relatively easy. Whichever investment platform you choose, the procedure is practically the same: you will be asked for a valid email address and a password that only you will know.

You will then be asked to check the "Terms of use and privacy policy" box. If you haven't already, take the time to read them before completing your registration so that you don't have to accept anything that doesn't suit you.

Once you have entered the details, you will receive an email with the link to verify your registration: follow the standard procedure and you are ready to use the platform.

Registration on the platform
Registration on the platform

What is a demo account?

A demo account is a type of account that a trader can use to practice their simulated money trading strategy. Practice the strategy until you feel comfortable with it. With a demo account you can trade at any time of the day, even when the corresponding market is closed. It is advisable to practice for at least three months or even more before trading with your own money.

Ability to open a demo account for training
Ability to open a demo account for training

How to start trading?

To trade live you need to activate your real account. It is easy to do, you just have to fund this account with at least the minimum amount established by the system on the platform we are considering, this amount is only 10 dollars. Choose the recharge option among those that appear on the platform and transfer the money with your debit card or with one of the payment systems offered. The money is credited instantly and you can use it immediately. Withdrawal of funds can be done with the same methods, the minimum withdrawal amount is 2 dollars.

Deposit replenishment options
Deposit replenishment options

Tools for day trading

With the advanced trading tools the online trading system offers, you can significantly limit your potential losses. Stop loss and take profit functions help you control your risk.

With a limit order you can specify a certain buy or sell price. When this price is reached, trading takes place automatically.

With a stop-loss limit, you not only specify when a share should be sold, but also when the price is too low to sell. In this way you prevent your share from being traded at cheap prices in a sudden crash.

Using Stop Loss
Using Stop Loss

It is quite possible that your share will quickly increase in value. If you want your stop limit to automatically adjust to this and be set accordingly higher, simply set a trailing stop-loss order.

As mentioned above, traders use technical analysis to predict short-term market movements.

Technical analysis includes analysis of market price patterns. When a day trader sees a clear pattern, it means that price is more likely to go one way than the other. Many patterns can be used both by day traders and those who base their trading on a longer time frame.

Day traders who specialize in technical analysis make trades lasting from a few seconds to a full day. Technical analysis indicators come to the rescue. Choose a platform, which offers these indicators. The most commonly used indicators are trend lines, support levels, resistance levels and moving averages.

Indicators for technical analysis
Indicators for technical analysis

How to become a successful day trader?

Day trading is an activity associated with risk. Unfortunately, no one can absolutely guarantee the success of the operation with certain actions. There are no exact instructions on how and in what to invest, what term to choose, which markets to prefer. But nevertheless, there are general rules, by following which you will greatly increase your chances of success. Here are some of them:

  • Your knowledge is your strength. Invest in yourself early on, using various sources to expand your knowledge on the subject. You can use sources such as the media (print media, audiovisual media, online platforms), books, video tutorials, blogs, and forums. Also, don't be afraid to learn from your own mistakes. 
  • Amount of the initial investment. Never risk more than 1% of your trading balance on a single trade, which is a proven rule of thumb in day trading. 
  • A reliable computer or laptop with enough memory and a fast processor is essential so that you can take full advantage of the investment platform that your broker offers you. You should also have a mobile phone with enough data to back it up in case you lose your internet connection. 
  • Broker. Choose a brokerage company that offers the most suitable platform for day trading. The broker must be licensed and the platform must be functional, informative and suitable for you in terms of commissions. 
  • Knowledge of the market. Follow the news and learn to analyze how events in the world of economics, politics, science, ecology, etc., influence asset prices.

Practice and hone your trading skills using a demo account, and sooner or later you will see positive results.

The financial services provided by this website carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose