How to Become a Day Trader In Canada

Day trading is a type of trading in which deals are closed before the market closes on the same day using financial instruments.

Day trading has become popular in Canada due to its huge profit potential. In this context, we will discuss how to become a day trader in Canada in this post along with other pertinent details.

What is Day Trading?word image 6565 1

Day trading is simple and profitable. All you have to do is purchase and sell stocks in a single day.

It necessitates lower purchase prices and higher sales prices. A liquid investment that can rapidly take on new dimensions is day trading.

It involves scheduling when to purchase stocks at a discount and aiming for the ideal moment to sell them.

It requires a great deal of expertise, experience, and good fortune.

Not every investor is cut out for day trading; it takes guts and a willingness to take risks. Indeed, the stocks could have a sharp decline in value or rise in value, which would cause an immediate loss on your investment.

While some investors have made enormous profits from day trading over the years, many others have lost a fortune.

So, to avoid losing your hard-earned money, plan and take your time when day trading in Canada.

Types of Orders for Day Trading

Before beginning a day trade, you must place stock orders. You may accomplish this easily by using your online brokerage account.

But before you can move forward, you have to select the type of order that you want.

The following order types are available for day trading:

1. Limit order

A limit order is designed to purchase or sell stock at a fair price. It is possible to execute a sell limit order at the limit price or higher.

However, a purchase limit order may be placed at a price that is less than the amount.

2. Market order

The quickest and most popular kind of order for day trading is a market order. Purchasing or selling a security via a broker is involved.

These kinds of orders are usually fulfilled at the best prices on the market.

3. Stop order

A stop order often called a stop-loss order, entails purchasing or selling a stock once at a particular price that is referred to as the stop price.

Therefore, if the stock values are reached, a stop order will change to a market order.

What is the Difference Between Day Trading and Investing?

The time frame is the main distinction between investment and day trading. Assets can be purchased and held by investors for years or even decades.

To increase their initial investment, they rely on the company’s growth as well as dividend reinvestment or compound interest.

Conversely, day traders will search for tiny, incremental increases to lock in a rapid profit. These benefits may materialize in a few minutes or even hours.

While long-term investors mostly focus on the fundamental examination of the underlying company, day traders will examine charts and employ technical analysis.

As a day trader, you usually lock in trades for most of the trading day, or at least a few hours. Although they may check their brokerage account every day, long-term investors often don’t buy or sell stocks daily.

Is Day Trading Legal in Canada?

In Canada, day trading is allowed.

The laws governing day trading in Canada are less stringent than those in other nations, such as the US.

For instance, the Pattern Day Trading Regulation in the United States designates a person as a day trader if they execute more than four trades in a week.

You need to have a margin account with at least $25,000 to do this, and it affects your taxes. That’s not the case in Canada.

However, this does not mean that in Canada, gains from day trading are tax-free. Taxes on capital gains are undoubtedly due, just like they would be for a long-term investor. However, there are several distinctions, which I will discuss now.

Business Incomes vs. Capital Gains

People never look forward to having to report taxes. The CRA frequently classifies day trading winnings as business income as opposed to capital gains when it comes to trading. Why does this occur?

The number of trades you execute throughout the year allows the CRA to calculate your trading activity.

If the CRA concludes you are a day trader, your profits will be fully taxable since they will be treated as business income.

In contrast, only 50% of capital gains are subject to taxation. Day trading has the potential to yield bigger gains, but that potential is accompanied by higher tax rates.

Reporting your Capital Losses in Canada

The total amount of capital losses you are allowed to record is another significant distinction between the United States and Canada.

Although nobody likes discussing losses, even the strongest among us can experience them.

You are only allowed to disclose capital losses of up to $3,000 in the US. They can only be offset against your capital gains, but there is no ceiling in Canada.

Recall that the taxation of capital gains is limited to 50%. You cannot deduct capital losses from your job income, which is subject to full taxation just like business income.

10 Steps to Becoming a Day Trader in Canadaword image 6565 2

We’ve published a step-by-step tutorial on how to become a day trader in Canada in case you’re interested in learning more.

Step One: Evaluate yourself.

You have to assess your suitability for the job before proceeding. This is because day trading necessitates the fusion of numerous abilities, characteristics, expertise, and lifestyle dedications.

The following conditions must be met for day trade in Canada:

  • Have the capacity to work long hours
  • Take a couple of vacation days or time off from work.
  • Self-actualization and ongoing self-education
  • Possibility of taking chances
  • Possess the ability to work with optimism

Remember that becoming a day trader requires having an optimistic outlook. Being mentally ready to take chances and experience loss as you are ready to dedicate yourself to self-learning would be beneficial.

Step Two: Obtain sufficient funding

The game also includes prolonged and sporadic losses. Furthermore, you can’t count on continuously turning a profit, so you need to have enough cash on hand to cover this risk.

If you begin trading with little capital, there is a significant probability that you will lose money.

Step Three: Recognize the market

To become a successful day trader in Canada, the next stage is to gain market knowledge. From basic to complex elements, a solid market foundation is required.

These include news events, tradable instruments, margin requirements, and the exchange’s trading hours and holidays.

To put it another way, you need to be well-versed in trading.

Step Four: Possess sufficient knowledge of securities

Stocks, ETFs, mutual funds, and futures all trade in distinct ways. Therefore, to prevent failing if you initiate a trading strategy without adequate understanding, you need to be aware of the security’s features and trading needs.

You need to be aware of how margin requirements for futures, commodities, and options might affect your capital as well as how they may affect your trading plan when an option is exercised or assigned.

If you don’t have solid knowledge of these topics, failure is inevitable. Therefore, learning more about trading the securities you select might be beneficial.

Step Five: Establish a trading strategy

Choose at least two proven methods to begin with if you are not an experienced day trader. This is because if you fail, the two will step in as a backup if there isn’t a chance to trade.

With improved techniques, you can advance to more substantial complications as you gain expertise.

Step Six: Combine plan and strategy.

To complete a trading plan, you should not only choose the best trading method but also one that complements it.

These include understanding the strategy’s implementation (entry/exit), the necessary capital, the amount of money used for each trade, the assets to be traded, and the frequency of trade placement.

Step 7: Acquire and practice money management skills

To assist you in assessing certain obstacles and determining your prospective profitability, you must practice money management.

Even if there are only a few winning deals, you will be able to generate more profit if you are a competent money manager.

As a result, organize, schedule, and execute the deal following your suggested money management strategy and capital allocation plan.

Step 8: Examine brokerage fees.

High brokerage costs could be incurred by a typical transaction. Therefore, you must do a lot of research before selecting a brokerage plan.

If you expect to trade once or twice a day, you can choose a per-trade brokerage plan. However, if you trade on a huge volume every day, you want to choose a staggered schedule.

A broker provides more than just trade execution; they also provide trading amenities. trade platforms include historical data, optional combinations, trade alerts, trading software, and chat apps with technical indicators are examples of integrated trading solutions.

To avoid adding extra features, we suggest you choose the ones you need and subscribe.

Step Nine: Excite and do a backtest.

Stimulating and backtesting is the next step in learning how to day trade in Canada. This entails testing your strategy using virtual money on a test account.

Additionally, you can make use of historical data.

Step Ten: Keep expanding

The final phase is to begin small and grow from there. Keep in mind that if you adopt a new strategy, you shouldn’t play large on your first transaction, even if you have enough money and expertise. Rather, you should always start with a smaller budget when trying a new tactic. If it works well, you may then raise the stake.


How do I begin day trading?

You shouldn’t just start day trading, especially if you’ve never done it before. I advise opening an account with a Canadian bargain brokerage first.

This will assist in lowering trading expenses, which can mount up if you execute multiple trades per day.

Although day trading is a considerably riskier way to play the stock market, it can be a very profitable way to make a living.

Is day trading a way to make a living?

It is possible to earn a living via day trading. Many traders in Canada make their living solely from trading stocks and other assets.

Having said that, if you are a novice day trader, there is a significant chance that you will lose money.

Which Canadian platform is the best for day trading?

In Canada, you can day trade on any platform; however, my recommendation is to use a bargain brokerage.

Sites with no limitations on day trading and reduced trading fees include Wealthsimple Trade, Questrade, and QTrade. If I had to pick one, I would say that Wealthsimple Trade offers Canadian traders zero-commission deals.

What is the minimum amount of cash required in Canada to start day trading?

Any amount can be used to begin day trading. To put it differently, trading stocks for a living does not require a minimum amount of capital.

When is the optimum time for Canadian day traders to trade?

In Canada, the best time to trade is between 9:30 and 10:30 a.m. Eastern Time.

What causes traders to lose money?

The main cause of the majority of day traders’ losses is their insufficient understanding and expertise of the day stock market. Day traders should also avoid trading recklessly without having a plan and setting unattainable targets.


In Canada, day trading has the potential to be a profitable strategy for making quick gains on the stock market.

You can make money more quickly than with long-term buy-and-hold investing, for obvious reasons.

There are numerous risks associated with day trading, and if a couple of your trades end badly, your account balance may be in jeopardy.

Practice in a paper account first is always my recommendation when experimenting with any new trading method.

This will make it easier for you to understand how challenging trading in the real-time stock market’s volatility may be.

Recall that the purpose of this essay is to provide you with an overview of day trading in Canada.

Please make sure you do your research before attempting to day trade with real money, as this is not intended to be financial advice.


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