Can You Day Trade on DEGIRO?
Many retail investors might be wondering whether DEGIRO, a popular online brokerage platform, supports day trading and how feasible it is to engage in this fast-paced form of investing on this platform. Let’s break it down: DEGIRO does allow day trading, but there are some nuances to be aware of before diving headfirst into it.
The Basics of Day Trading on DEGIRO
DEGIRO is one of the most popular platforms in Europe, offering access to a variety of markets and financial instruments. But unlike more specialized trading platforms, DEGIRO is more catered towards long-term investors and occasional traders. While this does not mean you can't day trade on DEGIRO, it’s important to understand the pros and cons of using this platform for day trading.
To start, the most critical thing to note is that DEGIRO offers real-time trading on most stock exchanges. Real-time trading is crucial for day traders because even a delay of a few seconds can mean a missed opportunity or a poor entry/exit point. DEGIRO's Basic and Active profiles provide live data access, which is necessary for day trading. For those looking for more advanced features, the platform offers Trader and Day Trader profiles, which provide additional tools and functionalities, such as access to leverage and short selling.
Cost Structure
One of the biggest considerations for day traders is the cost of executing multiple trades within a short time frame. DEGIRO is known for its low fees, especially when compared to many other brokerage platforms, but day trading involves a lot of transactions, and the costs can quickly add up. DEGIRO charges a commission for each trade, and while it might be low compared to other brokers, frequent trading can erode profits. Additionally, there may be exchange connectivity fees if you're trading in markets outside of your home country.
For day traders, who may execute dozens or even hundreds of trades in a day, keeping track of these fees is critical. DEGIRO’s fee structure makes it attractive for casual day trading but can become expensive for professional day traders executing high volumes.
Leverage and Margin Trading on DEGIRO
One of the most attractive features for day traders is the use of leverage. Leverage allows traders to control a larger position than their initial capital investment, amplifying both potential gains and losses. DEGIRO offers leverage, but it's more limited compared to some platforms that are designed specifically for day traders.
To access leverage on DEGIRO, users need to upgrade their account to either the Active or Trader profiles. The Day Trader profile offers even higher leverage, but the requirements are stricter, and traders need to meet certain margin requirements. This is another important aspect to consider. Margin trading can be risky, especially in a volatile market, and without proper risk management, traders can quickly lose significant amounts of money.
Market Access and Asset Availability
DEGIRO provides access to a wide range of markets, including major European and American stock exchanges, as well as ETFs, bonds, options, and futures. For day traders, having access to different markets can be beneficial, as it allows them to take advantage of price movements across various asset classes.
One downside is that DEGIRO doesn’t provide access to forex trading, which can be a popular asset for day traders due to its high liquidity and volatility. Similarly, cryptocurrency trading, which has gained popularity among day traders, is also not available on DEGIRO. This limits the flexibility for traders who prefer to switch between asset classes during the trading day to maximize their profit opportunities.
Tools and Features for Day Traders
Day traders rely heavily on charting tools, real-time data, and fast execution. DEGIRO offers basic charting tools, but they may not be as advanced as what you would find on other dedicated day trading platforms like MetaTrader or Thinkorswim. Advanced traders may find DEGIRO’s interface somewhat lacking in terms of sophisticated charting and analysis tools.
However, DEGIRO does integrate with third-party platforms, allowing traders to use advanced charting tools and analytics software. This integration can help bridge the gap, but it does require traders to be tech-savvy and familiar with connecting external software to their brokerage accounts.
Risk Management
One of the most important aspects of day trading is risk management. DEGIRO provides some basic risk management tools, such as stop-loss and limit orders, which can help traders manage their risk by automatically closing positions when a certain price is reached. These tools are vital for day traders, who need to react quickly to market movements to avoid significant losses.
However, DEGIRO does not provide advanced order types, such as trailing stop losses, which some day traders might prefer. This can be a limitation for those looking for more sophisticated risk management strategies.
Regulations and Account Protection
When choosing a platform for day trading, security and regulatory oversight are key concerns. DEGIRO is regulated by the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). This provides a level of assurance that the platform is compliant with European regulations and that client funds are protected.
DEGIRO also segregates client funds from its own, ensuring that even in the unlikely event that DEGIRO faces financial difficulties, your money will remain safe. For day traders, who are often dealing with large amounts of money, this is an important consideration.
Who Should (and Shouldn’t) Day Trade on DEGIRO?
Day trading on DEGIRO is possible, but it’s not for everyone. The platform is ideal for those who are just getting started with day trading and want to experiment without being overwhelmed by high fees or complicated interfaces. For these users, DEGIRO offers a balance between low costs and sufficient tools to get started.
However, for professional day traders or those looking for more advanced trading features, DEGIRO may fall short. The limited leverage, lack of access to forex and cryptocurrency markets, and basic charting tools may not be enough for those who need a high-performance trading platform. Traders looking to engage in high-frequency trading or those needing more advanced analytics may want to consider platforms that are specifically designed for day trading.
Final Thoughts
So, can you day trade on DEGIRO? The answer is yes, but with some limitations. DEGIRO is a great platform for those who want to dip their toes into day trading without incurring significant costs. However, it’s not the best platform for professional traders who require advanced tools and access to a broader range of assets.
Before you start day trading on DEGIRO, it’s crucial to fully understand the platform’s fee structure, leverage options, and market access. Day trading can be a profitable endeavor, but it requires discipline, risk management, and the right tools. While DEGIRO offers some of these, it’s important to weigh the pros and cons and determine whether it’s the best platform for your specific day trading needs.
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