to earn a lot of money in a short time – this is the goal of many people nowadays. With daytrading this dream seems to become reality, the business sounds superficially nevertheless very easy. However, in addition to great stamina, you also need a certain amount of know-how to be able to earn money in the long term with this investment strategy. In the following, we tell you the best approach to day trading and what risks to watch out for. The most important facts in a nutshell and our best tips and recommendations right at the start!
Learn to trade – recommendations& tips
Learn to trade – the most important in a nutshell
How daytrading works?
The term day trading refers to short-term trading on the stock exchange. The trader opens a trading position within one day and closes it again on the same day. The aim is to profit from price fluctuations within the day. The speculation objects are not only shares, also with cryptocurrencies, foreign exchange and derivatives can be traded at the daytrading.
Tip: if you are interested in investing for the long term, you can find more information in our guide article on ETF savings plans.
Day trading – not a new phenomenon
Especially on social media platforms like instagram and twitter you can read more and more about daytrading. But the origins of this trading style go back several decades. Thanks to the introduction of the electronic communication network (ECN) in 1969 in connection with the NASDAQ system (national association of securities dealers automatic quotation) from 1971, day trading became possible. Stock trading was digitized and made available to the general population of the U.S. with the creation of tradeplus in 1982.
These taxes are incurred in daytrading
in germany, investors have to pay taxes on their capital gains. This also applies to daytrading profits. the maximum tax deduction is 25 percent. On top of that, the solidarity surcharge and if necessary. Church tax (the amount depends on the state). The taxes incurred are independent of the domicile of the daytrading platform, so taxes are also incurred by foreign trading providers.
For each person there is also the basic allowance of 9.000 euro plus the savings allowance of 801 euro. Accordingly, if you earn less than 9.801 euro, your profit is exempt from taxes. Any losses from daytrading transactions can be offset against your profit.
Learn to trade – already known?
For capital gains, first the personal income tax rate applies. If the tax rate is below 25 percent, you will have to pay less tax
Tip: if you have been charged too much tax, you can have it refunded via your tax return.
Step by step to becoming a day trader
If you want to start day trading successfully yourself, we have summarized the most important steps for you in our instructions below. Simply learning to trade? How to become a daytrader step by step!
1. Prepare yourself extensively
Daytrading is often sold as very simple. the trader is promised high profits in a short period of time. It is tempting to make short-term investments without first studying the material in detail.
That’s why we recommend: build up extensive expertise before you make your first trades. How to minimize the risk of loss. Be aware, for example, that you cannot buy and sell your positions at any time, but are bound to the opening hours of the stock exchange. you can find even more exciting tips on buying shares in our guidebook.
Tip: open an account with a day trading simulator. There you can make test purchases and sales with virtual money. How to get a feel for the price fluctuations and do targeted research when you have questions.
Our recommendation: when choosing the trading simulator, make sure that it meets your needs. Are offered the assets of interest to you? When can be traded? Pay attention to the costs – not every daytrading demo is free of charge.
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2. Decide on a platform
There is a large mass of trading platforms. so don’t use the first one you see, but compare the different platforms before opening a securities account. Read the general terms and conditions and be aware of the fees and conditions. How to avoid negative surprises later.
Product recommendation: we recommend that you open a finances.Net zero 1 depots. Here you can trade different asset classes without order fees. The account management is also free of charge.
3. test your ideas: use "play money" only
No master has yet fallen from the sky. Be aware that it can happen that you incur losses at the beginning. Do not invest large amounts of money for this reason. Instead, test your ideas with small amounts and increase them if you are successful. So you can try different assets at the beginning to become aware of the respective volatilities. If you have found a suitable investment object, for example a share, you should occupy yourself intensively with it.
Note: some investors are successful in the long run by limiting their purchases to a few objects and possessing a lot of knowledge in these niches. Especially for beginners, we recommend a broad diversification in the portfolio to better compensate for strong fluctuations.
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4. Find a suitable trading style
Basically, you can distinguish between three different trading styles. In the classic day trading style, the trading position is held for a few hours on average. Often the trader has a clear price target in mind. When this has been achieved, he immediately sells. It can also happen that a position is closed again after a few minutes. Furthermore, there is the so-called scalping and swingtrading.
With scalping the holding time is shorter than with daytrading. positions are sold after a few seconds to minutes. So often only small cent amounts are earned. However, the more of these trades are executed within a short period of time, the more this method pays off.
Swingtrading is the holding of trading positions for a slightly longer period of time. Sales are made only after a few days or even weeks to capture the highest possible profit. Rising prices can be fully exploited, but the trader will make fewer trades.
Important: you will only find out which trading style suits you if you have already made trades. Do not focus at the beginning on a specific holding period, but make the trades so that you feel comfortable.
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5. Create your own daytrading strategy
When you have gained your first daytrading experience, you should create a plan that you want to stick to in the future. How to avoid knee-jerk reactions. After a trade, record your results and update your strategy if necessary.
A trading strategy should include the following points:
Risks of day trading
Daytrading has a high potential for investors – both in terms of possible gains and losses. If the development of a trading position is predicted correctly, investors can make big profits with only a little money. However, if you look at the facts and figures around the topic of day trading, the trend in reality looks quite different. according to a study by financial expert brad barber, around 80 percent of traders make losses within a year. In the long run, the number of people who earn profits continues to shrink.
In addition to the choice of the wrong object of action, psychological reasons also play a role. If a trader makes a loss, he is more inclined to take risks in his next trade to make up for the loss. To consider are also the trade costs. Different order commissions and third-party fees apply depending on the trading platform selected. therefore, before trading, be aware of the costs involved: the trades are only worthwhile if, after deducting the costs, you make a profit.
With a low-cost depot provider, you can keep these costs under control especially easily. our broker-comparison helps you to find the right securities depository. We checked the advantages and disadvantages of both internet banks and online brokers.