What is Day Trading in Canada? (2024)

Most people were once locked out of day trading. In 2024, it is not only common but easy to do from home thanks to online trading platforms and apps.

Stocks, CFDs and commodities are now at traders' fingertips.

In this article, we are going to look at some of Canada's pre-eminent day trading platforms and evaluate their value for the customer. Including the costs, benefits, and learning material that might benefit you in your day trading adventure.

What is day trading?

If you are new to investing, day trading may seem a bit odd. Why would you buy and then sell a stock on the same day? The reason is that by trading stocks in the short term, you can make a hefty return over time.

Day trading is simply a type of trading that happens fast. The process of trading stocks, bonds, options or other financial instruments for a short period of time- usually a day, but sometimes much quicker than that. The purpose of day trading is to invest in stocks and other options and trade them at a profit for more than you bought them for. Normally day trading involves lower margins of profit.

So, why day trade when the margins are often so small? The answer lies in the accumulation of value over time. To be successful in day trading, you have to monitor the news cycle constantly, and ever be on the alert for new information to make a profit. Professional day traders are often seasoned investors, with a full team of investors and researchers to work with. For new and non-professional traders the market can feel daunting. Day trading is not a risk-free adventure and is challenging to master. Fortunately, there are a number of platforms which offer a wide range of services to help you learn how to day trade.

What are the best day trading platforms in Canada?

To help you get started we've compiled a list of Canada's best trading platforms.

Qtrade: the most complete day trading platform

The most well-rounded platform of them all, Qtrade offers a little bit of everything for the inspiring investor. Qtrade offers trading tools and educational material meant to help you grow and excel as a day trader.

Qtrade offers a fully realized platform for those who want to hit the ground running on your investing opportunities. They offer four main trading accounts.

Qtrade's platform for users presents an easy-to-use and understandable interface to help you make the best investment strategies. You can invest in US and Canadian bonds and stocks, monitor your investment portfolio's performance and learn about the most up-to-date market reports to help you trade at lightning speed, all from their website.

Wealthsimple: the platform making day easy

Wealthsimple offers an impressive range of instruments to make trading simple and easy in Canada. By creating an intuitive and easy-to-use platform, WealthSimple offers an easy solution to Canadians looking to start investing with as little hassle as possible.

WealthSimple offers two plans for its customers. Basic- a plan which costs no money to use and caps your investments at $1,500, and Plus- which costs $10 dollars a month allows you to trade up $5000 as well as trade unlimited US Stocks with no FX fees on US trades.

Both plans have no commissions, account minimums, or fees on Canadian trades. Each plan comes with unlimited price alerts and allows you to buy fractional shares.

The advantage of Plus is the greater market capacity with the potential for unlimited trading of US stocks and no FX fees on stocks from our neighbours to the south. This is not a bad option for someone who wants a little more room to maneuver with a larger risk tolerance. The Basic plan is right for the new investor looking to start actively day trading without investing too much money upfront. Both options are good for potential investors.

Wealthsimple offers Canadians an easy and affordable platform to start investing.

Questrade: the best day trading platform for advanced traders

Questrade is one of the largest platforms available for trading on the market. A professional platform with over two decades of experience, Questrade requires no money down to open an account. Some of the platforms analyzed here are more focused on beginner or moderate investors. Questrade differentiates itself by having a robust platform. Their day trading services include the following services.

• Questrade Trading- An online platform service where you can research the market, buy and sell and manage your investments in one easy place.
• Questmobile- Be able to track the market and buy and sell on the go with the Questmobile app.
• Questrade Edge - Questrade Edge is a downloadable tool for both Mac and PC with more research and software tools to choose from. It allows you to analyze data and stocks, set up alerts, and manage your funds. You can also create advance trading orders as well.
• Questrade Global Questrade's premier program for Foreign Exchange (forex) or global investments. With key features such as live charting, creating alerts, and getting raw economic data and reports.

The major drawback about Questrade is the upfront $1,000 to open an account which may be too steep for new investors just looking to start day trading.

XTB: a leading European broker with a wide range of products

One of the larger platform options to start with is XTB. XTB has a number of services and educational materials to boot. XTB is a Polish-based company that offers a number of educational materials to help you get started today.

XTB's main services are xStation 5 and Station Mobile which both offer over 2100 financial instruments to choose from forex to commodities, to individual stocks. What makes XTB stand out are the learning materials ranging from video courses to articles and eBooks to read on its website meant to help its clients learn more about trading and investing.

XTB has garnered a reputation for positive customer service. In 2021 they won an award for their customer service from forexbrokers.com. If you are new to day trading and need assurance that you can have support from the company, that might just be the assurance you need to help you feel confident in your choice of platform.

Finally, if you're still unsure if you want to sign up with the XTB they offer a 4-week demo version of their service for people wanting to get their feet wet before signing up for the real thing.

Can beginners do day trading?

If you want to get into trading on the market with little experience you can of course try day trading. However, it is important to remember that just because you can start with little experience, it does not mean you will be successful out of the gate!

Professional day traders and hedge fund managers sometimes take years to make a profit.

Day traders do not usually make these returns without experience. Whatever you invest in, or whatever platform you use, it is important to research whatever you plan to invest in. The platforms analyzed here can help you with your day trading and investment, but don't forget that a key to good investing is research. If you are new to investing, long-term investing might be a wiser decision to consider starting with- as long-term investing with index funds or ETFs are more sure bets compared to day trading. Additionally, before you start day trading, you should figure out your risk tolerance for your investment.

What are the best strategies for day trading?

When researching how to day trade, it is easy to get bogged down with conflicting information. Day trading can be incredibly confusing with numerous advice books, youtube channels, and web forum guides giving competing information. Traditional day trading involves buying purchasing a financial instrument in the morning and not holding it overnight. Sometimes traders borrow heavily in order to try and make this approach work. This can be a risk-heavy investment strategy. So today, we are going to look at just two types of investment strategies used by professionals- Value Investing and Quantitative Investing.

Value investing

Let's start with Value Investing which famously has been used by Warren Buffet in his firm Berkshire Hathaway. Value Investing involves researching and looking for stocks that are priced below their intrinsic value — meaning their real value. Buffet famously focuses however on the stock of the company, not for its value in the market, but the potential real-world value of the company issuing stock. This means not just looking to trade for short-term profit but for longer-term gains. While this is not necessarily a day trading technique, and yet the principles of looking for undervalued investments, and researching their potential, can certainly help you in finding diamonds in the rough.

Quantitative trading

Quantitative Trading involves the strong use of an analytical mind, computer models, and access/knowledge of the market and data. "Quant" traders as they are sometimes called, focus heavily on creating computer models to search for potential investment opportunities and look at the historic performance of the market to help them make the right call on what stocks to pick and choose.

Professional quantitative traders can make a large salary with bonuses attached for their handiwork. However, quantitative trading can be quite mentally challenging, requiring a good understanding of mathematics and computer modelling in order to trade. What makes it worth discussing is its attention to research and data to understand the market, which contrasts with intuitive strategies. This strategy would be most valuable to people with modelling skills who want to use their day trading platforms to study the long-term historical data of the market you want to invest it.

The challenges with day trading strategies

The strategies were selected because they involve a tremendous focus on research. However, there are plenty of other trading strategies not mentioned as well. However, both the ones mentioned here involve a large focus on research, familiarity with the market and past market performance. For quantitative trading, you will likely also need a familiarity with complex math and computer modelling to make it work.

Additionally, it's important to recognize and compare how day trading can not always beat more passive forms of investing such as index funds and robo-advisors. These more passive forms of market investment traditionally offer a higher return on investment.

Does this mean day trading is pointless? Not at all, plenty of financial firms and hedge funds rely on day trading to turn a profit. However, it's important to understand that they are focusing heavily on research, mathematical algorithms, and computer models to make their investment decisions. Some traders in order to make a profit, attempt to leverage their investment heavily. However, as mentioned earlier, this can be very risky.

Are there any risks with day trading?

The short answer is yes! The longer answer is yes and it can be worth it.

Day trading involves risks on fractional percentages of stock and shares which could end up being a loss if the stock invested in ends up not doing as you expected. If you planned to buy low and sell high of certain company stock- for example, and by closing the price goes down, you can lose money on the investment if your investment.

Additionally, some day trading strategies are riskier than others. As the US Securities and Exchange Commission noted recently, day traders often borrow heavily each day in order to capitalize on short-term market fluctuations. If you follow that approach, you could risk not only losing the money you invested in the stock but also end up deeply in debt you weren't prepared for.

It is really important to study the stock, bond, or financial instrument you plan to invest in to ensure the best chance of success in day trading. While the platforms we reviewed can help you get started in day trading, they are not substitutes for research and knowledge in and of themselves.

Are there any courses I can take to learn or improve my day trading?

While there are plenty of courses to help you learn day trading, it can be hard to find which are the right ones for you. Several day trading platforms like Qtrade and XBT offer articles and training material that you can use to help you learn to day trade.

If you are looking for a book on day trading, it might be wise to read books by investors such as George Soros and Warren Buffet, both of whom have famously outperformed the market in their return on investment annually. This may help you with not only learning about day trading strategies but also how to do market research in a sound way.

How is day trading taxed in Canada?

While there is money to be made in day trading, there are taxes involved in day trading. Short-term gains taxes are going to cut into your day trading profits. In order to take advantage of tax incentives for amateur traders, most novice day traders use either a Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) for their day trading. These accounts are tax-free long-term savings or retirement accounts not meant for professional investors. For example, if the CRA notices that you are buying and selling too much in your TFSA they will flag your account and it could be taxed as a capital gains!

If you plan on day trading full-time as a professional investor, you may need to look into creating other bank accounts to handle taxes and accounting for your business income related to day trading. Should the CRA determine your day trading as business income, you will have to pay a capital gains tax. If you are an investor trading as a form of passive income. Be careful of how much you made in net profit, you will have to pay 50% of the gains in your normal tax bracket, but if you lose money, you can write that off as a loss and reduce the amount of capital gains tax you have to pay. If you don't write it all off as a loss on this year's taxes, you can put that loss to the next year.

Is day trading a risk-free way to get rich?

Day trading is not an easy job, and the professional investors who trade on the market would caution that short-term trading will not make easy riches. Hedge Fund Manager and Academic Patrick Boyle at Polmar Fund remarked that his hedge fund grew through gruelling market research and hard work. Additionally, it is important to remember that while day trading is exciting and can be rewarding, more passive forms of investment such as index funds usually are a sure and safer way to invest.

Day trading is certainly one way of bringing in revenue to your home. However, it's also a risky form of investing that is not for the faint of heart. Some platforms are better suited than others for education, market research and minute-to-minute updates. Still, no matter the platform it is important to recognize that simply choosing the platform that best suits you will not automatically lead to success. You also have to keep in mind your tolerance for risk, your investment capacity, as well as your tax account.

That being said, day trading can be lucrative. Start comparing to learn more about the trading platforms and get started day trading.