Day trading is a share trading style in which traders buy and sell shares throughout the day. Some days, these trades are completed within minutes or even seconds without going before the market opens or after it closes, while other trades end up being held for several days. Traders may hold their positions overnight but usually do not exceed two consecutive days.
In day trading, traders seek short term profits that they believe they can capitalise on quickly compared to long term investments. The high degree of leverage involved in day trading means that you may also amplify potential losses. In particular, leveraged instruments such as futures contracts allow a relatively small deposit to control large contract sizes worth tens of thousands of dollars.
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Be licensed
In Australia, a license from ASIC is required for day trade futures contracts. To get an ASIC license, traders must meet special education and experience criteria, including completing a course in Australian financial services law and regulation. There are other ways people can be approved for a license without completing this requirement, such as being sponsored by an industry member if they have been working in the industry for at least three years. Anybody applying for a license should expect to submit a substantial amount of personal information to ASIC so they can conduct background checks before issuing one.
Open a brokerage account with a futures trading firm
Before getting started, traders may need to open up accounts with firms that provide them access to the futures markets. There are many such companies to choose from, and they all have different account minimums and offer various services. Most of these firms offer some software or platform that traders can use to help them analyse the markets and execute trades at their convenience. Some of Australia’s most popular futures brokerage firms include IG Markets, CMC Markets, FOREX.com, Saxo Capital Markets, Pepperstone Financial, Oanda and ThinkMarkets Group Limited.
Deposit with your chosen broker
Potential traders will need to make a small deposit with the firm to open up a futures trading account. Not only does this serve as collateral for their trade positions until they close out those positions later on, but it also serves as a means of attracting potential traders. The deposit amount usually ranges from $5000 to $10,000, and there is usually no minimum age requirement.
Choose an appropriate futures contract
When day trading futures contracts in Australia, there are many available choices to select from. Traders need to understand what each contract entails to make the right decision based on their preferred strategies. These include commodities such as corn and sugar, which traders often use for short term purposes such as hedging and financial instruments that allow traders to trade the significant indices without actually having to own them outright.
Open a position
Now that traders have deposited money into their accounts and found an appropriate futures contract to trade, it’s time to open a position. The mechanics of this process differ across platforms and brokers. Still, the basic premise involves selecting whether they want to go long or short, specifying how much money they want to invest and what type of order (limit, stop loss etc.) Once the order is submitted, the market will fluctuate over time until one party eventually agrees with another on a price that allows both parties’ orders to be filled.
Close out your position
Once traders have profited from their positions (or lost money), it is usually placed in their best interest to close them out instead of holding onto them overnight. If traders fail to do so and try and carry their positions over to the next day, they may end up without any money in their accounts because overnight expenses may eat away at their balance. The mechanics of closing out positions again differ across brokers and platforms, but traders should find this function on their desired platform with ease.
Analyse market data
Besides opening and closing positions, day trading futures contracts also require traders to analyse market data. You can do this in various ways, like looking at market depth, tick charts or demand/supply indicators.
The more time you spend analysing the markets, the better your chances of satisfactory investment return.
