Day Trading in Canada | A Full Guide To Make Your Investments Less Risky and More Profitable

December 18, 2021 | Editorial Team

Day Trading

Trading and investing are becoming increasingly popular in Canada. With a rising cost of living, the financial freedom that trading can offer to Canadians is proving tempting. Day trading is less well-known than other kinds of investment opportunities. Although day trading can be risky and quite often stressful, it can also be extremely lucrative if done correctly. With a proper strategy, you can reap more than you expected even during a stock market crash.

Day trading is not just a hobby or a way to make some extra money. Day traders usually commit to trading full time. It is both a career and lifestyle choice. Today, we will look at day trading in more detail and help you understand the opportunities that may be available to you.

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What is Day Trading?

Day trading is when traders buy and sell stocks within the same trading day. You hold your securities for no longer than a day. All trading positions should be closed before the end of the day. This removes unmanageable risk and the potential for negative price gaps when the market opens the next day. Day traders trade based on stocks price fluctuations in the market. They will usually enter and exit multiple trades on the same day.

Day traders can trade on a variety of assets and financial instruments. These include stocks (see Air Canada’s stocks and Rogers stocks), ETFs, forex, cryptocurrency, futures, precious metals, nickel, cobalt and so on. Also, check out all you need to know about day trading in your TFSA. Day trading was once undertaken only by financial institutions and professional traders. It has grown in popularity in the last few decades and has become more mainstream. Day traders use different trading strategies to make gains on movements in the markets (see the 3-Day rule in stocks).

It is possible to begin day trading with as little as $100, although larger amounts are usually traded. Day trading can be very profitable, but it can also be extremely risky. You should only trade money that you can afford to lose; otherwise, you risk enduring a severe financial loss (see if you can owe money on stocks). Day traders aim to use trading strategies to minimize their risk and maximize their potential gains like investing during holidays that yields maximum returns and carries low risk at the same time.

How to Start Day Trading

Learn the Market

The first step when starting day trading is to learn the terminology and jargon. Without the knowledge of the trading language and stock exchange reports, you will find it difficult to understand trading strategies, styles, and the technical analysis involved. Those who try to trade without understanding the fundamentals of the market are destined to fail. There are a variety of markets you can day trade. The most popular ones are the stock market – see more about stock market investing essentials – and the forex market.

To be a successful day trader, it is usually better to focus on one market, such as the stock market, and become an expert in this market. Day traders need to be attuned and receptive to even small market changes. They need to be able to react instantly when market conditions change. Before beginning day trading:

  1. Research your chosen market extensively.
  2. Read books, blogs and other traders’ advice.
  3. Look at the charts and ensure you understand the natural flow of the market.

Remember that the majority of day traders trade professionally and use day trading as their main source of income (see also option trade). To try and match their trading success, you also need to match their trading knowledge.

Develop a Strategy

There are many successful day trading strategies. When you are aiming to capitalize on price movements in the market, an effective strategy is vital. A good trading strategy will involve deep technical analysis (see more about fundamental and technical analysis) and the observation of charts and patterns. These will help you to predict future price movements (see Air Canada predictions). There are several important factors to consider when developing your trading strategy.

  1. Liquidity:Are you able to quickly enter and exit a trade? The need to access money quickly and determine the company’s financial status has brought about the concept of liquid net worth.
  2. Volatility:What is the potential profit range? The more volatile the trade, the higher the potential for profit and loss.
  3. Volume – Also known as Average Daily Trading Volume. This tells you how often the asset has been traded within a set time period. Speaking of assets, the money shareholders receive if the company liquidates its assets is what equity is.

It would be best if you also considered the importance of money management and time management to your day trading strategy. How much money are you comfortable with risking? Prepare for losses and set your limits. When choosing which trading strategy is best for you, it is important to research them thoroughly. The most popular day trading strategies include:

  • Scalping
  • Trend Following
  • Range Trending
  • Contrarian Investing
  • News Trading
  • Chart Patterns

We will look at these in more detail later.

Set Up a Demo Account

In Canada, before you begin trading real money, it is possible to set up a demo account to practice in a secure and risk-free environment. This enables you to practice trading in real-time. You can practice different strategies and see how they fare under different market conditions. Most trading platforms and brokerages will offer demo accounts. A demo account will help you to hone your trading skills before trading with real money. It also allows you to assess trading platforms and check which one is the right fit for you.

Set Goals and Know your Limits

As part of your trading plan, ensure you know your short term and long term goals, and you stick to them. Only trade using the money you have set aside specifically for investing (see how to be a stockholder). Risk management and having a plan on how you react if you are faced with an unexpected drop in a stock’s value are also important. It may be wise to set stop-loss order. This is a pre-arranged point in which you will buy or sell your asset (see how to buy stocks from Tesla). You can also place daily stop-loss orders. This is the amount you are willing to lose in a day before you withdraw from trading.

Find Out the Tax Implications

Understanding the tax on stock gains in Canada is an important factor when day trading in Canada. How you will be taxed all depends on whether the Canada Revenue Agency (CRA) considers you to be a full-time or professional trader. The CRA will consider a number of factors when making this decision. These include the frequency of your trading, the type of assets you own, your trading volume, and whether trading is your main income source. If you are considered a professional trader, 100% of your gains will be taxed by the CRA, so we recommend reading our earlier post on dividend taxes in Canada.

The Best Platform for Day Trading – Questrade

Questrade is an online trading platform. It is the biggest online trading brokerage in Canada. They allow you to invest in stocks (see energy stocks), bonds, forex, ETFs and mutual funds, among other things. Questrade is popular with beginner traders as well as experienced traders. Questrade users have access to advanced research tools and chart pattern tools. They can also access trading news and information.

Questrade (see also Qtrade and Questrade review) gives its users the option to build their own investment portfolio with a self-directed account. You can also choose a pre-built portfolio designed by experts. Their pricing is easy to understand, with no hidden fees. Questrade is renowned for its great customer service. They can be contacted via phone, email or instant chat in the ‘contact us’ section of their website.

Questrade only allowed traders from Canada to use their trading platform. They have several different account types available. These include short-term accounts and retirement accounts. Nonetheless, other platforms are not lagging much behind so check out our back-to-back Interactive Broker vs Questrade comparison.


  • Questrade is regulated by the Investment Industry Regulatory Organization of Canada (IIROC). It is also a member of the Canadian Investor Protection Fund (CIPF). The strict regulations help to protect your money. They also have a strict privacy policy. The privacy policy protects your account and personal information.
  • Their all-in-one trading platform is well designed. It also has great features, such as customizable watchlists and chart pattern tools. There are three different chart types to choose from and 30 technical indicators you can use.
  • Questrade charges no annual fees. Additionally, as they are a discount brokerage, you can save money by not paying high commission fees.
  • For self-directed accounts, expect to pay $0.01 per share with a minimum price of $4.95 and a maximum price of $9.95 per stock. ETFs are free to buy, although you will pay a commission when selling them. For the Questwealth portfolios, expect to pay a 0.25% commission on balances below $100,000. Balances over $100,000 will pay 0.2% commission.
  • You can open a demo account free of charge and practice trading for 90 days. A demo account user will still have access to customer services and can contact them using the ‘contact us’ button.
  • Multiple trading platforms are available, including the desktop site and the mobile app.
  • There is no withdrawal fee, as long as you are withdrawing the funds in Canada.


  • There is a $1,000 minimum deposit amount to open an account.
  • It can take a day or even longer to open your trading account. This could be a problem for those itching to get started.
  • You may be charged an inactivity fee if you do not use your account in a three month period.


As the biggest online brokerage in Canada, Questrade is very popular with day traders. Their excellent customer service, high tech research tools and wealth of information makes it easy to see why they are so popular in Canada. Their demo account option is great for those who are unsure about day trading or unsure about choosing Questrade as their trading platform. It also allows you to sell stocks on the weekend or anytime when the physical stock market is closed.

The $1,000 minimum deposit amount could prove problematic to those looking to open smaller accounts or those who want to begin trading with smaller sums of money (check out best penny stocks) before working up to larger amounts. However, this is one of the only negative points to an otherwise fantastic day trading platform.

Day Trading Strategies

Trend Following

Trend-following is one of the most popular day trading strategies. It involves trading in the direction of an established trend. If it is an upward trend, you will look for buying opportunities (see why stocks from Canada Tire are always a good buy), and if it is a downward trend, you will look for selling opportunities. Day traders use technical analysis and chart analysis to look for trends.

An upward trend would show higher highs and higher lows. A downward trend would show lower highs and lower lows. Trend-following is so popular in Canada because it is usually an effective day trading strategy.

Range Trading

Range trading, also known as channel trading, involves working within normal high and low movements. A day trader will look at a security’s recent trading history. You will look at typical highs and lows and use support and resistance levels to help you determine your buy and sell decisions.

On the chart, two trend lines will be positioned. The channel resistance line will be above the price, and the channel support line will be below the price. The price action is the space between the two lines. If the price breaks above the resistance line, a buy signal will be triggered. If it moves below the support line, a sell signal will be triggered.

Contrarian Investing

Contrarian investing is based on the idea that the market usually overreacts to both extreme highs and extreme lows. Contrarian investors see this as an opportunity to make gains on the reversals that happen when the market overreaction corrects. Contrarian investing can be a difficult strategy for day trading. It requires detailed analysis and experienced stock buyers and sellers to predict when the market is likely to reverse.

For those experienced day traders, the contrarian approach can be extremely profitable. Once predicted reversals have been identified, the trader will enter the trade. The trade is not expected to last longer than a day.


Scalping is another popular day trading strategy in Canada. It is particularly popular with forex traders. Scalping aims to capitalize on tiny price changes in the market. It involves buying and selling stocks multiple times in a day for small gains. As soon as a trade becomes profitable, you would exit the trade. Scalp traders can trade as many as 100 times in a day.

Scalping is an attractive strategy for many traders in Canada, as there is less risk involved. The goal is not to make big profits. Instead, scalpers focus on quantity. They aim to make lots of small wins to add up to a big profit (see top small-cap stocks). Scalpers will usually only stay in a trader for seconds or minutes before exiting. Precision timing and fast execution are vital for successful scalping.

News Trading

News trading is one of the oldest day trading strategies in Canada. A news trader doesn’t focus on stock prices and chart results. Instead, they make their trading decisions based on information. This information could be company announcements like issuing of new shares, buybacks, or information about the economy, or industry rumors. Similarly, see what happens when a company is bought out.

A news trader should have a good knowledge and understanding of the markets. This allows them to identify which information will result in a positive or negative reaction in the market. News trading may not always be effective as long periods of time can pass between announcements. Often, news trading is combined with another trading strategy to create a more effective overall strategy.

Chart Patterns

Chart patterns cover a number of different trading activities. Chart patterns are price formations that form into a pattern. They can give a visual representation of the supply and demand of a stock. Chart patterns can be used to identify when to open a new trade or when to exit a trade. There are many types of chart patterns. Some are more profitable than others.

There are two main types of chart pattern, the Continuation Pattern and the Reversal Pattern. Day traders can benefit from using either of these. A Continuation Pattern is signalling that a trend is likely to continue. A Reversal Pattern is signalling that trend may be likely to end, and a new trend may begin.

The Bottom Line

It is easy to see why day trading is increasing in popularity in Canada. Although there are significant risks attached, if you are sensible, prepared and knowledgeable, there are great opportunities for financial growth – see blue chip companies that have constant growth (see also Canadian POW stocks). To succeed as a day trader, it is important to first educate yourself. Learn the trading jargon, familiarize yourself with the market and become adept at technical analysis.

Choose a trading platform and trading strategy that suits you. Open up a demo account to practice trading before committing to investing real money. One of the most important things to remember for day traders is to risk money you are not willing to lose. Reduce your risk by placing a stop-loss order on your trades. Don’t rush into becoming a trader. Being prepared and having a plan is crucial to your success.