when people first get involved in trading one of the things they might consider doing is day trading but i'd say this is probably one of the most difficult ways of starting trading so i thought let's do a video explaining what day trading is and how you can avoid avoid the common pitfalls [Music] hello i'm david jones from capital.com i thought we'd do another educational video um talking about day trading so day trading explain for beginners i think when people who haven't traded before or who have had little exposure to trading think about it um they think that trading is all about sitting in front of a screen 12 hours a day jumping in and out and trying to make some money and really that's that that's day trading you know it's fairly short-term trading so i thought let's do a video explaining what day trading is um the common pitfalls the common mistakes um i think you know an overall theme with trading is that people tend to be far too short-term and i think if you're going to start day trading that's clearly one of the problems but i thought let's go through all of this and perhaps give some pointers on uh if you're starting day trading or you are a day trader ways of improving your performance um as usual if you're watching this video and you haven't subscribed if you could click on subscribe it does help support and grow the channel and means we can continue to push out lots of different content like this educational content and also content on the various markets we cover throughout the week right let's get into it um so topic number one what is day trading well in its purest form day trading is trading a market in and out during the day but no overnight positions so at the close of the market the day trader doesn't have any trades open and starts the next day uh afresh so the appeal of that one of the appeals is the fact you don't have any overnight risk so if something crazy happens when markets are closed you're not subjected to a shock when the market opens again the downside is as we'll talk about as we go through this um you can miss out on some of the bigger moves by being too short-term focused so when we're talking about day trading um what markets should you trade in theory anything if the market's open during the day you could try day trading it if you wanted to i mean popular markets tend to be stock market indices so the s p 500 or the nasdaq uh in the us here uh in in europe we have the dax the german stock market index is always a popular one or the ftse 100. and for me i must admit if i had to day trade an index i would focus on uh the us markets in terms of volatility and liquidity also of course foreign exchange markets uh are always popular to the main ones pounding against the dollar euro dollar dollar yen those sort of markets but then there's a whole host of other fx markets you can trade and commodities oil is the one i think that perhaps jumps out at me because that is a market where normally we have quite decent uh volatility throughout the day perhaps more volatility than it's seen in some of the other commodity markets so there's some some headline markets to think about when trading um so day trading i said right at the start is in and out the same day no overnight positions but that still means you could have variable time frames throughout the day you might want to sit there and watch one minute charts you might want to sit there and watch 10 minute charts or 15 minute charts um so again it's important to think about how long you want to hold trades for and how much noise and volatility you're going to put up with personally me i'd be looking at 10-minute charts but we'll have a look at that when we get uh on the platform then it's what sort of trader are you going to be are you going to try and follow trends throughout the day so perhaps get into a position early on and try and ride that move throughout the day or are you going to take the view that you're going to go against trends if the market has an extreme view in the extreme reaction uh following a major news announcement let's say like interest rates or non-farm payrolls the market might go down for example and you might take the view well actually that move is overdone so you're going to go against those initial moves so there's a couple of different ways of trading and we'll take a look on the platform you can use orders as well you know you don't just because you're day trading you don't necessarily need to be sat in front of the screen 12 hours a day if you know there's a certain level where you want to buy oil perhaps 50 cents lower than where it's trading now you can use an order to take some of the stress away and just sit there and it gets filled if the order gets fit hit then of course there is the all-important risk management the downfall of most traders and let's not forget most traders lose right the downfall of most traders they don't pay attention to risk management just because you're short-term trading doesn't mean you can't have a big move against you uh throughout the day so you need to still think about stop losses where am i going to get out if it goes wrong and think about how you can maximize your profits but let's take a look at some of these points let's jump on the platform and take a look and try and explain day trading a bit more by looking at some of these markets so let's start things off with the idea of day trading i'm going to look at the nasdaq this is the nasdaq 100 so i thought show you the idea of you know what day trading is all about so the idea is in and out during the day but no overnight positions so if i look on the nasdaq the nasdaq's a 24-hour market but the trading day this is yesterday's trading day runs from about here on the chart and then if we jump through to the close then that's up here so you can see lots of volatility throughout the day even though it trades overnight a lot of the time the volatility will not be the same sort of level depending on what's happening in the world but the idea is to trade within the trading hours for that market and end the day with no overnight positions so when it comes to which markets to trade let's stick with the nasdaq for now if i take this chart out slightly i mean we've had quite a lot of volatility this week so this is the last three days or so so looking at the nasdaq as an example of a stock market index the market has gone from almost as low as 12 000 to about above 12 900 so lots of volatility just over these last few days so again as a day trader an opportunity there for plenty of trading opportunities the opportunity to make and lose money of course so that's you know one reason indices appeal um we do get fairly decent swings throughout the day and it's markets that people are familiar with and if we look at a currency pair this is pounding against the dollar same sort of period so again over the last few days has gone from about 119.50 to as high as 122.40 so we've seen nearly a 300 point move in pound against the us dollar over the last few days so another example uh as to why currencies are popular markets i mean currencies are true 24-hour markets anyway um but again if we're day trading we probably don't want to be carrying any overnight risk but you can see we get some sudden moves quite a lot of sideways moves doing this though which could be frustrating if you're sat there watching the market then a sudden move again and the market goes sideways but but again with with currency markets we do have a level of volatility which of course is what we need when trading and then finally i thought we'd look at a commodity i used i talked about oil um a few minutes ago this is oil again over the last few days the time of recording has gone from as low as about 93.65 to as high as uh 99 so again big move here five and a half dollar move in the price of oil uh over recent days so so another market that appeals to people as a way of trying to make short-term profits via day trading so let's talk about the time frame let's stick with oil for now so i've got a five-minute chart here and within this five minute chart i think we can see things such as trends we can see that on the 28th of july the market slipped to 95.50 and it came back to it a few hours later that was good support and then if we jump forward it came back to it again uh in the early hours of the next morning so we see this idea of support and resistance if you're familiar with that you know in the chart in the five minute chart now i can make this a shorter term chart if i flick this over to a one minute chart there's that old support that we had uh down around 95.50 we have a lot more noise of course on the chart because every minute the chart is drawing a new candle it's completely up to you what time frame you want me i i rarely go below well i don't go below five minutes for me five fifteen ten minutes they're my preferred time frame i don't wanna be looking at a one minute chart but perhaps your approach is different but i think for me the slightly higher time frames work to try and filter out some of the noise uh in the market and not getting caught up sort of chasing the market all day long one of the points i talked about is your trading style are you a trend follower or are you looking to go against the trend if we look at this is the nasdaq from a couple of days ago we saw the market push higher in response to an interest rate decision and then start to back off you may have taken the view then well actually this market has overdone the reaction to an interest rate decision and you look to sell short you're fading the trend or another approach would be well actually the market is trading higher so what i'm going to do is buy the dip the market did dip and again over the next 24 hours has pushed higher so it's really important you can make money and lose money both ways think about am i going to try and go with the broader trend for the day or over the last couple of days or are we gonna wait for perhaps an extreme move in the market like we had here where the nasdaq fell uh a couple of hundred points in fairly short order and used that as an opportunity uh to say the mark is overreacted and like i say both approaches completely valid but i think it's important to decide which box you fit in as a day trader the other thing you can do of course is to leave orders so if you look at a currency pair so here's a five minute chart of euro us dollar so so we've seen the euro trade is low it's about 101.90 uh so far this morning it was a few hours ago so i think well actually maybe if it comes back down here again i want to be a buyer at the moment it's about 15 20 points above that so what i can do if i click on buy i can actually leave an order to buy if the euro gets back to that old level so the point here is making the platform do the work for you you can see the blue line there on the chart so that if the euro drops that level i'm gonna buy in because i might be expecting the level to act to support so i don't need to sit here and watch the market okay so using orders is i think a a clever way of trying to free up the time and enforcing the discipline of sticking to levels the other part of discipline of course is to use a stop loss so again just because you're day trading don't use it as an excuse to forget about risk management so i might want to be a buyer of the euro if it gets to uh 101.90 but if the market falls to 101.60 i want to come out the trade so having a stop loss and risk management for uh for all of our day trades i think is a very sensible approach and to wrap things up i would just say let's not forget most people lose money trading and one of the reasons people lose money is by being too short-term so do not assume that day trading is the only way to trade you know we've seen some great trends in markets that run for days weeks and sometimes months so having to sit there and figure out where it's going to go in the next hour isn't necessarily the cleverest bit of trading but i thought i'd just do this quick video on explaining how day trading works that's it for this quick update on day trading explained i hope you found it useful there's a whole load more educational content on our youtube channel so take a look at that but for now from me davidjones and capital.com we'll leave things there good luck with your trading for more trading videos just like this please subscribe to our channel you