Day Trading - Day Trading Strategies

Day trading is a term used to refer to the activity of buying and selling stocks and/or currencies within the same trading day. While it used to be performed exclusively by the investment companies and large banks on the market, day trading has opened up to individuals who trade through their personal accounts. In fact, there are many Canadian brokerages that offer the option of stock trading for interested day traders.

There are essentially two main kinds of day traders in Canada. The first category encompasses the professional day traders who work for investment companies or banking institutions. The second category comprises of the day traders who work for themselves or for their own business. Professionals have access to a large roster of financial tools that aid analysis as well as to financial information and resources. On the other hand, amateur or individual day traders often have smaller resource base in terms of finances.

Just like with any day trading, there is heavy leverage involved. Generally, there are many risks associated with this activity. It is definitely not for everybody while those who want to engage in trading need to have skills and financial knowledge to succeed.

One of the ways to minimize the risks in day trading is to be wise about the amount of money involved. The harsh reality is that most day traders lose money in many ways. Wise day traders, especially those who are not working for large firms, do not trade with the money necessary for everyday expenses or with retirement funds.

In addition to these considerations, day traders have to pay large commissions to the companies they are affiliated with in exchange for the training and equipment they have access to. Money may end up turning into debt at the end of the trading day. Savvy day traders know the amount of allowed expenses that will take to create a profit.

Taxes are also a special consideration when it comes to day trading in Canada. The gains and losses for the day trader taxpayers are considered business income instead of capital. As a result, all the gains are taxed and all losses are deductible. The business loss is considered deductible from another income source. In order to determine whether the transactions count as income or capital, the tax authorities examine the conduct and the intentions of the taxpayers.

In some situations, the taxpayer has securities transactions which are also capital transactions. During the same year, she or he has other securities transactions which are income transactions. An example is when a day trader has two investment accounts: one for day trading and anther one for investments that are not frequently traded. The latter category is categorized in the form of long-term investments. It should be noted that Canadian securities are shares of the capital stock of a corporation in Canada, a unit in a trust or bond, or other similar stock issued by an entity operating on the territory of Canada.