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How to Day Trade in Canada

Written by Jessica Steer
For years it’s been known there is money to be made when working with the stock market. Because there is such little interest to be made in savings accounts many more people are turning to investing in stocks as well as other investment markets.
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    It’s become much easier to invest since you no longer need to go through a financial advisor. While you can buy and trade stocks through your bank, there are apps and online brokerages everywhere now that allow you to buy and sell your own stocks and investments which has led to an increased interest in day trading.

    What is Day Trading?

    Often when people begin to enter the investment world they have a lot of questions but one of the main ones is can you buy and sell stocks on the same day? In short, the answer is yes and this is one of the principles behind day trading. Day trading is when an investment is bought and sold at least once within a short period of time, usually within a day or so, hence the name. Many people don’t realize that you don’t have to hold onto an investment for a long period of time. Because the investment market often fluctuates at a moment’s notice, most of the time day trading is more lucrative than waiting out investments.

    If You haven’t heard of day trading, you may have heard of intraday trading. It’s the same thing with just a different name.

    Swing trading

    Another form of trading similar to day trading is swing trading. What exactly is swing trading? Well, this form of trading follows the same principles as day trading but a swing trader looks to make small to medium profits over a longer period of time. Usually over a couple of days up to several weeks. These traders use a lot of the same principles that day traders do, and the same knowledge required applies.

    Even though day trading can be quite lucrative, it is important to remember it isn’t a get-rich-quick scheme. Professional day traders often do lots of research on the stocks they choose to day trade, even then, they do still experience significant losses. If you do decide to start day trading, be prepared to allow for losses as well as gains.

    Day trading marketplaces

    There are many marketplaces that people use to day trade, but the most common is Forex trading (foreign exchange) and the stock market. These markets fluctuate often and can be determined by economic statistics, interest rates, and corporate earnings.

    Day trading strategies

    Here are a few common day trading strategies to help navigate the trading markets:

    • Scalping focuses on earning profits from small price changes in the market. Many traders who use this strategy trade hundreds of times per day. These small profits often add up quickly and are seen as less risky.
    • Range Trading is a little more technical. It involves using support and resistance levels in the market. Basically, this strategy involves calculated decisions based on current popularity in the market and uses that information to determine whether it will make a profit or not.
    • News-based trading is just what it sounds like. Traders use economical changes to make stock decisions.
    • High-frequency trading allows professional day traders to use special algorithms to take advantage of any fluctuations in the market.
    • Trend following. uses an investment’s historical performance to dictate its current risk. If the investment has historically remained stable, chances are it will stay that way.
    • Contrarian Investing is a principle some investors follow where they sell what other investors are buying and buy what others are selling.
    • Price action involves looking at the price fluctuations over time of the investment and making a judgment based on the trend.
    • Chart Patterns use the investment’s trends to plot a pattern. Traders use this pattern to determine the future of the investment and decide the right time to buy or sell.
    • Technical Analysis focuses on the investment’s price and volume statistics to determine the best course of action.

    As you can tell, these strategies do involve a lot of research and experience. That is why it is recommended to start out slow and develop these skills before jumping directly into day trading. The more you can develop these skills, the higher your chances are at making a sustainable income from day trading.

    Can you day trade stocks?

    Stock’s are one of the most popular investments to day trade but they are just one of the many things that are available to trade in today’s day trading market. Stocks are shares of companies that fluctuate quite often which make them perfect for day trading. Stocks also include ETFs (Exchange Traded Funds) which are combined stocks sold as one. Some other options for day trading are:

    • FOREX (Foreign Exchange Currency Market) is another one of the most popular markets for day traders because of the volume available. Forex works outside of regular trading hours which allows for more money-making opportunities and is often recommended for those just starting to day trade.
    • Cryptocurrencies are also increasingly becoming more popular. Some of the more popular cryptocurrencies are Litecoin, Ethereum, Ripple and Bitcoin. This market is becoming much easier to invest in making it a great way to start investing or day trading.
    • Binary Options are straightforward investments and are sometimes referred to as “All or Nothing” investments. These investments are easier to predict how much risk there is before trading and can often be traded on any market.
    • Futures are specific contracts that are agreed upon to be bought or sold at a defined future date for a specific price. This type of trading is often used when trading commodities such as oil.
    • Commodities is the trading of goods internationally. Things like grain, minerals, oil and cotton.

    While there are many different options to day trade, stock trading is a great way to get started with day trading, and then you can figure out what investment option works best for you.

    How to Start Day Trading in Canada

    Now that we have gone over some of the basics of trading, where do you start? First, can you day trade in Canada? Yes. It is simpler to day trade in Canada than it is in the U. S. and getting started day trading is much easier than it sounds. Apps such as Wealthsimple and Questrade can help you get started. While there are less trading apps available in Canada than the U.S. , these apps provide you with the power to trade right from your phone. They also provide the trends in the stocks to help you decide where the best place is to start investing your money.

    Wealthsimple is actually one of the most popular trading platforms in Canada. This is because it’s simple to use, has low fees, and has great reviews. This gives traders a lot of confidence when they are looking for trading platforms.

    Questrade is another really popular trading platform to trade on. While its fees are sometimes more than Wealthsimple, they offer a wide variety of trading options. This is great for traders because they can trade multiple securities all in the same place.

    Day trading risks

    Day trading can be quite risky, so it is important to do some research before you start buying stocks and/or deciding on the market you wish to invest in. The first thing you should do is study the market. Even if you understand the basics of the stock market it is important to have a good understanding of the different factors that influence the market. Studying these factors can guide you to make the most educated decisions. Many traders choose to study one specific industry and focus on those market factors when trading.

    Once you have learned the market then you need to decide what strategy you want to use. There are a few of the most popular strategies above. Of course, there are many other methods you could use. These just give you an idea of where to start.

    Canada day trading process

    Now that we have discussed knowledge and strategy, it is time to start experimenting. It is recommended to start low and figure out your footing before investing a ton of money into day trading. 0% commission apps such as Wealthsimple can be a great way to start. You can see the stock trends, invest small amounts of money, and study the trends in real-time. This low-risk practice will allow you to practice different strategies and figure out which one works the best for you. Then you can start figuring out how these investments can affect your taxes. Talk to someone who specializes in this area. This will help to avoid a hefty tax bill at the end of the year and how to claim trading on your taxes.

    While the apps are a great way to start earning some money, learn the basics of day trading and find your footing in the industry; once you start to make your way up to a consistent level of trading you will need to go through an investment platform. Whether this is an online brokerage or an in person advisor is up to you. A broker/brokerage will help you with trades through the platform that they use and will provide the expertise needed to day trade effectively.

    The most important thing when starting to day trade is to have goals in mind and set limits for yourself. Once you have gathered your footing with trading stocks and gauging the market. The next step is figuring out what platform you want to use to day trade. Remember, it is better to wait to become a full-time trader until you have started to earn a consistent income.

    Who is considered a Day Trader in Canada?

    Now that you have begun the process of day trading. When are you considered to be a day trader? The Canada Revenue Agency defines a day trader as someone who makes a living by managing investment transactions, or someone who works in the industry and makes frequent trades in a short period of time. In reality, anyone can start dabbling in day trading but you aren’t considered a day trader until it becomes your main source of income. Even though this is the case, any income you receive day trading, even if it isn’t your main source of income, must be reported to the CRA.

    The rules of day trading in Canada

    When it comes to day trading in Canada, even though the rules are more lenient than those in the U.S. there are a few rules you need to keep in mind. First, it is important to claim your income correctly as either trading income or capital gains. Mostly the income of a day trader is considered business income and gains can be taxed but losses are tax-deductible. Keeping track of this can also keep you out of trouble with the CRA.

    Superficial Loss Rule

    One of the most important rules of day trading in Canada is the Superficial Loss Rule. This is also known as the “30 day rule”. It applies to 30 days from the date of the sale and 30 days after. If a capital loss occurs within this time it is considered to be a superficial loss and cannot be claimed. This rule basically enforces that a seller can’t sell a share, trigger a capital loss on that share and then immediately re-buy that share.

    The second rule is that there is no minimum amount required to participate in day trading unless you start dealing in US stocks but if you strictly deal in Canada then you don’t have to worry about this. Even if you are a Canadian day trader, if you start dealing in U.S. markets, a $25,000.00 minimum is required. The only required amount of money for some brokers can be the “one Canadian dollar cheque”. This is as a result of government requirements related to money laundering but isn’t required by all brokers.

    The next rule is more of a suggestion instead of a rule, but it is recommended to not risk more than 1-2% of the balance in your account on a transaction. This helps reduce the risk of loss and increases the potential for gain. The less capital you risk increases your overall gain. Trading can be very risky, especially, if you are new to the market. It is important to not make too many risky decisions and practice safe trading. Many people can get swept up in the idea that day trading is fast money and lose everything very quickly. A majority of the most successful traders follow this rule.

    Even though there aren’t very many rules related to day trading in Canada it is important to adhere to the ones that there are. If you aren’t sure, be sure to consult a broker or an accountant to verify you are adhering to the rules.

    Self-Employment and Day Trading

    Depending on how much you make, and if it’s your main source of income, the CRA could determine that your day trading income is actually business income. In that case, you wouldn’t be eligible for the capital gains tax, and you would have to pay taxes as if you were self-employed with a business. This is because investment income is considered income.

    If you’re considered to be a self-employed day trader, then you’re going to be taxed at a rate based on your total yearly income. The more that you make, the more tax you pay. That said, as a self-employed person there are plenty of write-offs that you can make, in order to help save yourself some extra money.

    Day Trading and TFSAs

    When it comes to day trading, many people have opted to open Tax Free Savings’ Accounts. Tax-Free Savings’ accounts are accounts where the interest on the money deposited in these accounts are tax-free. This can be tricky when dealing with day trading income. TFSAs are meant to earn interest over time on savings and have an allotted amount per year that is available to be deposited tax-free, similar to an RRSP. This amount is cumulative over the years so, depending on your age, it can be quite high.

    Like RRSPs you can hold different investments in your TFSAs such as:

    • Cash
    • Mutual Funds
    • Bonds
    • Guaranteed investment certificates
    • ETFs

    Even though the interest in a TFSA is considered nontaxable, if the income in the TFSA is determined to come from any sort of investment income, that will be taxed.

    How will the CRA know what the TFSA is used for? Well, even though it is not necessary to individually declare your year-end balance of your TFSA, banks do provide that information to the CRA annually. So, before you start using TFSAs for day trading, make sure you speak with a financial professional to make sure you fall within the CRA tax guidelines.

    How much do you need to start day trading in Canada?

    In Canada, there is no minimum amount required to start day trading. However, depending on what market you are trading in can determine what amount you should start with. If you are trading in FOREX it is traded in lots and a minimum of 1000 units of the foreign currency you are trading in is needed. Therefore, the minimum amount of money needed would be enough for 1000 lots.

    Stocks have no minimum amount in Canada but the U.S requires $25,000.00. If you decide to trade in U.S stocks this amount might be required but a broker would be able to recommend a reasonable amount to start with.

    How do you make money as a Canadian day trader?

    The average annual salary of a day trader in Canada is $67, 995.00. Is it possible for you to make this much? Well that depends on a lot of factors. Day trading can be complex for someone who is not used to how the markets work and often has a lot of research involved. It is highly recommended that you have a solid grasp of the ins and out of trading before trying to make this a career. It is also important to remember that while many investments work within the stock market hours, some don’t, so this won’t be your average Monday to Friday job. It will also require research outside of this time to make the maximum profits.

    Following the steps and strategies above are a great tool to start making money as a trader but a lot of it will be from formulating your own research as well as investing your time into trading as well money. It can also be a little bit luck based. Even with a lot of dedication and research, some of the best traders still lose money. For this reason, it is also recommended to have substantial capital to offset any losses and to fund the next trade to make up for the losses. It is also recommended to use a diverse portfolio of different platforms to create more cash flow. Even though a focused platform is necessary to create income, it is also necessary to invest outside of that platform.

    Canadian online brokers and their fees

    Don’t forget that there will be trading fees involved with day trading. Different brokers have different fees and the cost of these all depend on the site or broker you decided to use. Here is a list of the best online brokers in Canada and their fees.

    Online Broker Fees
    Questrade $0.10 per share (4.95 min and $9.95 max)
    Qtrade Direct Investing $8.75 per trade
    Interactive Brokers $0.005 per share ($1.00 min and 0.5% of trade value max)
    TD Direct Investing $9.99 per trade
    CIBC Investor’s Edge $6.96 per trade
    Wealth Simple $0.00 per trade

    Many of these online brokerages offer apps to help with the flexibility when you are day trading. These online brokerages allow for trading with multiple brokerages as well as many of them have specialized focus in the investment market. The accessibility of these apps also allows for more money making opportunities and has substantially increased the public’s interest in stock price, day trading, swing trading and just investing in general.


    Day trading is one of those things that isn’t a fit for everyone but if you have an interest in personal finance and investing it may be something to look into. Make sure you start small to verify your interest and learn the different strategies and markets. Practice with small investments before investing into large one and gain some capital before making day trading your main source of income. These little precautions can help maximize your income from day trading and limit your risk of loss. Even if day trading isn’t the best option for you, that doesn’t mean you can’t enter the investment market. A lot of these markets are great for investing at a small scale to earn some extra money.

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