Getting into day trading from the UK

[ironjaw]

Dear all,

I must start by saying I'm overwhelmed by what a great forum this is. It's filled with so much information that I'm going to enjoy myself reading as much as I can while sipping my cup of tea.

To be honest, over the course of the last couple of weeks, I've found it hard to find a dedicated place to search about trading, especially from the UK. All websites are US specific, so it's hard to find relevant information for your specific needs. I've had people on twitter say to me: "What's the issue just open a TD America account and you're done. They're zero commission. Took me 15 min" Yup, not available in the UK.

A little bit of background, I've dapped into Forex back in 2017, but found it too intense - more like sitting in a F18 - too volatile for my taste. I also found out that I like researching and have a personality of investing for the long term. For that purposes I have an ISA - Shares and Stocks with Hargreaves and Landsdown with US stocks. However, although their fees are higher, £12 per trade, good for the occasional trader, but less so if you want to trade frequently. I've been searching for a broker to replace them but I am not sure. It's harder to find a good ISA broker. IG comes up a lot, but from the reviews, many warn against them.

Per HMRC tax purposes, I work as consultant, with my own ltd company and from home so that's my primary income.. This flexibility gives me access to follow the US markets daily, as I'm already in front of the computer daily.

Now to my question, I've found out that I want trade mostly daily with a small account £1000, starting small with a handfull of shares focusing on technique, analysis, execution and all the fundamentals to strengthen my strategy. The reason is two-fold. I want to gain practical experience on the market as opposed to practicing on a demo account where the loss doesn't feel as real. I'm more a of a hands on guy. Second, I want to create the setup needed to support this strategy, by having the correct broker, tools, charting software and anything else that I need. I would really appreciate to hear from seasoned traders here.

1. I want to trade solely US stocks.
2. I want to buy / sell same day.
3. I'm not interested in CFD's or margin and leverage (easiest way to blow up one's account)
4. I want to use Fundamental and Technical Analysis.
5. I'm looking for a broker that allows me to day trade with a small account.
6. It seems zero commission doesn't exist without losing some key features.
7. I understand there is a Day Trade Rule by SEC. If I have a small cash account, can I avoid this?
8. I want to avoid currency exchange fees. I've heard that with IB you can have one in GBP and one in USD?
9. I'm looking for a simple platform to record my trades for CGT purposes (As I undestand you need to convert to GBP). Of course if I go for day trading and not use my ISA

After reading so many broker reviews, I am left so confused that I appeal to your help. It's hard to find a reliable broker with zero commission, as studying the terms and services and execution policies as well as pricing information, there's always something that catches my eye Either they have DMA or they pool their execution to once a day at best price. There are some US brokers that allow international customers, such as First Trade, Zack Trade, etc, but I think you can't day trade with them.

Thanks

 

[wonge]

Dear all,

I must start by saying I'm overwhelmed by what a great forum this is. It's filled with so much information that I'm going to enjoy myself reading as much as I can while sipping my cup of tea.

To be honest, over the course of the last couple of weeks, I've found it hard to find a dedicated place to search about trading, especially from the UK. All websites are US specific, so it's hard to find relevant information for your specific needs. I've had people on twitter say to me: "What's the issue just open a TD America account and you're done. They're zero commission. Took me 15 min" Yup, not available in the UK.

A little bit of background, I've dapped into Forex back in 2017, but found it too intense - more like sitting in a F18 - too volatile for my taste. I also found out that I like researching and have a personality of investing for the long term. For that purposes I have an ISA - Shares and Stocks with Hargreaves and Landsdown with US stocks. However, although their fees are higher, £12 per trade, good for the occasional trader, but less so if you want to trade frequently. I've been searching for a broker to replace them but I am not sure. It's harder to find a good ISA broker. IG comes up a lot, but from the reviews, many warn against them.

Per HMRC tax purposes, I work as consultant, with my own ltd company and from home so that's my primary income.. This flexibility gives me access to follow the US markets daily, as I'm already in front of the computer daily.

Now to my question, I've found out that I want trade mostly daily with a small account £1000, starting small with a handfull of shares focusing on technique, analysis, execution and all the fundamentals to strengthen my strategy. The reason is two-fold. I want to gain practical experience on the market as opposed to practicing on a demo account where the loss doesn't feel as real. I'm more a of a hands on guy. Second, I want to create the setup needed to support this strategy, by having the correct broker, tools, charting software and anything else that I need. I would really appreciate to hear from seasoned traders here.

1. I want to trade solely US stocks.
2. I want to buy / sell same day.
3. I'm not interested in CFD's or margin and leverage (easiest way to blow up one's account)
4. I want to use Fundamental and Technical Analysis.
5. I'm looking for a broker that allows me to day trade with a small account.
6. It seems zero commission doesn't exist without losing some key features.
7. I understand there is a Day Trade Rule by SEC. If I have a small cash account, can I avoid this?
8. I want to avoid currency exchange fees. I've heard that with IB you can have one in GBP and one in USD?
9. I'm looking for a simple platform to record my trades for CGT purposes (As I undestand you need to convert to GBP). Of course if I go for day trading and not use my ISA

After reading so many broker reviews, I am left so confused that I appeal to your help. It's hard to find a reliable broker with zero commission, as studying the terms and services and execution policies as well as pricing information, there's always something that catches my eye Either they have DMA or they pool their execution to once a day at best price. There are some US brokers that allow international customers, such as First Trade, Zack Trade, etc, but I think you can't day trade with them.

Thanks

I’ve never really had a problem with IG. I like them and they have a huge range of tradable instruments including many US stocks. From my experience fees are pretty good.

You can setup a spread betting account of UK based and benefit from tax free trading which is a really bonus. Whilst in theory it’s a leveraged account you don’t need to actually used the leverage.

 

[ironjaw]

Please explain this: "you don't need to actually used the leverage"

To be honest, I'm not interested in spread betting as by using leverage is the quickest way to blow your account.
I understand that seasoned traders with $25,000 use margin but I'm not there yet, so would rather use a cash account and trade 3 times a week to avoid the PDT

 

[wonge]

All I mean is even though some spreadbetting forms will give you large leverage of say up to 1:20, you don’t actually need to max out that leverage. Often I only trade with a very small proportion of that available margin.

You have to understand leverage and margin though and be comfortable so you don’t make a mistake and risk more than intended. If you’re worried then you’re probably right it might be worth sticking to a classic stocks and shares account for now.

 

[ironjaw]

Thanks I understand. With IG is there a way to select the level of leverage. I’ve heard there some firms where under settings you can choose eg 2:1

 

[timsk]

Hi ironjaw,
I could have a stab at answering your questions as I used to day trade U.S. equities - but that was 10 years ago - so I'm likely to be out of date and I don't want to mislead you. Your best bet is to get in touch with the forum guru on U.S. stocks: Mr. Charts. He rarely posts these days but he does look in from time to time, so I suggest posting to his thread: How To Make Money Trading The Markets. and/or sending him a PM. There's not much he doesn't know about trading this market from a retail perspective!
Tim.

 

[ironjaw]

Thanks Tim. I will do so. I hope he doesn’t mind me PM but will post on the thread. What my issue has been is that after researching several weeks it seems everyone is gearing or pushing you into spread betting, SB in stead of buying and selling regular shares, with the added benefit of it being CGT free. I don’t really care about that. I tried Forex and didn’t like the idea of leverage. It sounds like a disaster waiting to happen if you don’t risk manage or know how to use. It’s just like using a knife to cut bread. If you don’t know how you can cut yourself.
With that said, I find it also conflicting to see the Pattern Day Trader Rule with the $25,000 requirement which is a good thing but then you have that the brokers give you leverage 1:4 which is back to the same story aforementioned. On the flip side I guess I can decide on trading three days a week then and choose the setups I want and avoid over trading but it just makes things so frustrating

 

[timsk]

Thanks Tim. I will do so. I hope he doesn’t mind me PM but will post on the thread. What my issue has been is that after researching several weeks it seems everyone is gearing or pushing you into spread betting, SB in stead of buying and selling regular shares, with the added benefit of it being CGT free. I don’t really care about that. I tried Forex and didn’t like the idea of leverage. It sounds like a disaster waiting to happen if you don’t risk manage or know how to use. It’s just like using a knife to cut bread. If you don’t know how you can cut yourself.
With that said, I find it also conflicting to see the Pattern Day Trader Rule with the $25,000 requirement which is a good thing but then you have that the brokers give you leverage 1:4 which is back to the same story aforementioned. On the flip side I guess I can decide on trading three days a week then and choose the setups I want and avoid over trading but it just makes things so frustrating

Hi ironjaw,
If you've decided to trade stocks and you want to buy and sell actual shares in the companies you trade - then you can only do that via a direct market access broker (DMA). Spread betting and CFDs are derivative products so, when you trade using either of these two vehicles, you're not trading actual shares. If you've further refined your market to trading U.S. equities (as opposed to U.K. equities - or whatever) - then you're likely to end up with a U.S. broker. I dare say it's possible to trade them via a U.K. broker, but my guess is that the universe of stocks will be limited to the Dow 30, Naz 100 and some big players in the S&P 500. Additionally, I imagine the cost (i.e. spread) won't be favourable. Ideally, if you're set on U.S. equities, then funding an account with a U.S. broker like Interactive Brokers (IB) is the way to go.

With regard to leverage, you're right to be wary of it as it is the undoing of many traders. However, think of it like a power tool - say a mitre saw - that can cause amputation in a nano second if it's handled carelessly, but is perfectly safe if used correctly. As wonge correctly points out, you don't have to use leverage if you don't want to and, in the overall scheme of things, 4:1 leverage for stocks is nothing at all and ought not to cause you any issues. Keep your position size small and, if you're long a stock, calculate how much you'd lose if it tanked all the way down to zero. (If you think the risk of this happening is infinitesimally small - try telling that to oil traders who found themselves in this exact position earlier this year!) Now, all you have to do is decide how much, (i.e. what percentage) of your account to put at risk.

Lastly, a word on spread betting. The reason you get steered towards it is because it's a good way for newbies to cut their teeth. It's quick and easy to open an account and you can be up and trading a demo account in no time at all. Setting up and funding a DMA account with $USD will take time - lots of form filling and compliance checks etc. So, I suggest you reconsider spread betting (or CFDs), not least because you may decide after a while that U.S. equities is not the market for you after all - just as you have with forex. Just my £0.02p worth - others may think differently.
Tim.

 

[ironjaw]

Ideally, if you're set on U.S. equities, then funding an account with a U.S. broker like Interactive Brokers (IB) is the way to go.

Fantastic. That's exactly what I have concluded so far. IB UK does take on clients here, but I don't think you can sign up for them in the US. Does anyone have experience wit IB and US shares?

So, I suggest you reconsider spread betting (or CFDs), not least because you may decide after a while that U.S. equities is not the market for you after all - just as you have with forex.

Hmm, CFDs, I've looked at them. I think brokers such as IG and eToro were advertising them but the spreads were wide. I didn't like the fact that what I saw on the market - the price - is not what I get. For example, I bought a bundle of AT&T shares ($T) at I think at $28.27 or somewhere, and with Hargreaves that's the price I received when I placed the order. It was quite comforting to know that mental price from the real time data on the market was the same. Of course, I paid £12 commission and 1% fx fees. On eTorro's website I think there was quite a wide spread on AAPL current market price and theirs. No, didn't like. I guess, with these you have a lot of calculations to do when you keep track, right? I mean compared to just looking up the price of a stock on XX date. Here I am referring to the Excel spreadsheet that one has to keep for tax purposes. Anyone here care to share a template?

By the way. I love the forum layout and this reply and quote functionality.

 

[cantagril]

Fantastic. That's exactly what I have concluded so far. IB UK does take on clients here, but I don't think you can sign up for them in the US. Does anyone have experience wit IB and US shares?
..................
..... For example, I bought a bundle of AT&T shares ($T) at I think at $28.27 or somewhere, and with Hargreaves that's the price I received when I placed the order. It was quite comforting to know that mental price from the real time data on the market was the same. Of course, I paid £12 commission and 1% fx fees.

I hadn't read this thread before I answered yr post on the demo account one. I'd suggest that there are more ways of killing a cat etc and with that in mind I'd suggest you take a look at Fineco bank: https://finecobank.co.uk/public/

As a spoiler alert - they do NOT do: demo accounts, Spread betting, Micro CFDs. I should add that their platform is clunky and not very intuitive and they are definitely not for absolute beginners.....and, as they are a bank, signing up is not a matter of filling in token form as with some SB brokers.

....however, what they do offer are: all manner of assets and shares from all over the place (on over 25 exchanges) including the US, a huge amount of complete free data, a pretty decent screener, very competitive commissions and, last but not least, full banking services including a multi-currency account that allows one to hold foreign exchange accounts in over 20 currencies . Once you've sorted out exactly what you want to do and how, I reckon they'd be well-worth revisiting - the commissions alone merit closer inspection.

 

[timsk]

Hi ironjaw,

. . .Does anyone have experience wit IB and US shares? . . .

Yes, I had an account with them to day trade U.S. equities and used eSignal for charting - but that was back in 2008! I believe Mr. Charts still uses them; he's been with them for a very long time - best part of two decades - and will be able to answer any questions you may have.

. . .Hmm, CFDs, I've looked at them. I think brokers such as IG and eToro were advertising them but the spreads were wide. I didn't like the fact that what I saw on the market - the price - is not what I get. For example, I bought a bundle of AT&T shares ($T) at I think at $28.27 or somewhere, and with Hargreaves that's the price I received when I placed the order. It was quite comforting to know that mental price from the real time data on the market was the same. Of course, I paid £12 commission and 1% fx fees. On eTorro's website I think there was quite a wide spread on AAPL current market price and theirs. No, didn't like. . .

I've not looked at CFDs for a long time - but what you say doesn't sound right to me at all. The spread may be very slightly bigger than that of a DMA broker - but that's because the commission is factored into it. Otherwise, it ought to be very similar and move in tandem with DMA price. Spreads tend to go bananas in times of great volatility, e.g. at Non-Farm-Payroll announcements or black swan events etc. Covid may have affected things - but I'd be surprised if a sleeping giant like AT&T was that volatile. However, I must stress I've not looked at any U.S. equities on an intraday basis for yonks - so I may be very out of touch and completely wrong!

. . .I guess, with these you have a lot of calculations to do when you keep track, right? I mean compared to just looking up the price of a stock on XX date. Here I am referring to the Excel spreadsheet that one has to keep for tax purposes. Anyone here care to share a template?

Not sure what you're referring to here? A good broker will do any amount of analysis of your trade history and swamp you with more info' than you can imagine. As for Excel spreadsheets, using one whilst day trading sounds very last century to me. But hey - if it works for you - who am I to knock it! ;-)
Tim.

 

[ironjaw]

Thanks, Tim for your quick responses. Appreciate it. I'm learning a lot on these forums.

 

[mpups]

.....I guess, with these you have a lot of calculations to do when you keep track, right? I mean compared to just looking up the price of a stock on XX date. Here I am referring to the Excel spreadsheet that one has to keep for tax purposes. Anyone here care to share a template?

The current capital gains allowance is £12,300 meaning if your net profit (after deducting losses) over the tax year is below this amount you don't need to inform HMRC at all

 

[ironjaw]

Lovely, cheers

 

[timsk]

Lovely, cheers

Hi ironjaw,
Kaeso makes a very good point. Given that you say in your OP that your starting balance will be £1,000 - I think it's safe to say that it will be many, many years before you need to worry about paying CGT! ;-)

 

[ironjaw]

Hi ironjaw,
Kaeso makes a very good point. Given that you say in your OP that your starting balance will be £1,000 - I think it's safe to say that it will be many, many years before you need to worry about paying CGT! ;-)

Ha! correct. I'm mainly going to work on my strategy and order execution as well as market familiarisation to get practice. Thanks all for the help.

 

[tomorton]

Where does this (widespread) reluctance to use leverage originate? Leverage is a useful tool for the job. Like any other tool it can be misused - its always possible to bring that hammer down on your thumb, but if you really want a nail in the wall what else should you use?

By the way, for the anti-leverage crusaders, what do you think your mortgage is?

 

[TickedOff]

hey Im in a similar spot as OP except I want access to the max leverage as possible, with an account size of $5k. I believe with IB I only get 2:1 leverage?

 

[oOMavvyOo]

Hi everyone
I'm in a similar position being in the UK and looking to open a trading account with a broker. My hope was that I could day trade from a Stocks and Shares ISA however the software for those brokers offering both a S&S ISA and low feels appears to be very basic. Has anyone had any joy finding a good middle ground?

 

[MasterOfCoin]

Hi everyone
I'm in a similar position being in the UK and looking to open a trading account with a broker. My hope was that I could day trade from a Stocks and Shares ISA however the software for those brokers offering both a S&S ISA and low feels appears to be very basic. Has anyone had any joy finding a good middle ground?

Welcome to T2W.

I trade with a selection of brokers doing just that.
You shouldn't have any difficulty finding an established broker that suits your needs for day trading.
But best avoid the offerings from old guard fuddy-duddy high street banks if you want better charting and a reliable easy to use interface, unless you like being logged out every few minutes and having to verify every tiny transaction 'for your own protection' ha ha.

But seriously, there's a whole bunch to choose from, just check out any that undercut the 'old guard'.
It costs the broker just pennies to execute your trade, so any charging you pounds for doing so need to be offering very, VERY good support for overcharging you with high fees.

If you get really stuck finding one that suits, by all means message me, but you find one easily enough.

☺️