Day trading
Session boundaries in local time
A day trade is defined by the clock, not by the calendar. The trading session is the window in which your platform accepts orders for that market, and it ends at a fixed hour each day. For AUD/USD the busiest window runs from the Sydney morning through to the close of the New York afternoon. Outside that window the price still moves, but far fewer orders are changing hands.
Your platform shows times in one zone, and it may not be the zone you live in. A position opened at 9am Sydney and closed at 4pm Sydney is a day trade. The same position opened at 9am and left open past the daily rollover becomes an overnight position, and the swap rule changes. The rollover hour is set by your broker and it varies between brokers.
Check where your platform prints the session clock before you place anything. If you cannot see the rollover time, you cannot tell whether a position is a day trade or an overnight one. Write the rollover hour beside your screen. That single note decides which cost rules apply to every position you open.
Spread, commission and the cost of being in
Every position starts behind by the cost of entering it. The spread is the gap between the price at which you can buy and the price at which you can sell. On AUD/USD around 0.6640 that gap is usually a fraction of a pip, but it is never zero. You pay it the moment you open, because your position is valued at the other side of the gap.
Some brokers add a commission on top of the spread, charged per lot traded. Others widen the spread and charge no commission. The two models can produce a similar total, but the total is what matters, not the label. Both the spread and any commission vary between brokers, so the figure from one platform does not transfer to another.
This cost is why a day trade needs a move larger than the spread to end in profit. A 15 pip gain is a real gain, but it is 15 pips minus whatever you paid to enter and exit. On a small position that subtraction is minor. On a large position it scales with size, exactly as the pip value does.
Decisions made while the price is moving
The difference between a day trade and a longer position is not the size of the move. It is that every choice happens while the price is live. There is no overnight pause in which to think. The level you chose before entering is the level you act on, or the market decides for you.
A written exit plan has two numbers: the price at which you close at a loss, and the price at which you close at a profit. Both are set before the order is placed, while the price is still still. Once the position is open, the plan removes the need to judge. You are not predicting; you are following a decision you already made.
The market can move through both levels in one session. A price that touches your loss level can later reach your profit level, and the reverse. That is why the plan is written down rather than remembered. The plan is the part of the trade that does not move.
One day, 20 pips, A$132.80
| Step | Amount | Note |
|---|---|---|
| Entry price | 0.6640 | The AUD/USD rate at the moment the position is opened. |
| Exit price | 0.6660 | The rate at the moment the position is closed, 20 pips higher. |
| Position size | 0.10 standard lot | One tenth of a standard lot, so 10,000 units of AUD. |
| Pip value for this size | A$1.00 per pip | One pip on one standard lot is 10 units of the quote currency; at 0.6640 that is about A$6.64 per pip, and one tenth of that is about A$0.664. Your broker's own conversion rate will differ slightly. |
| Gross result | A$13.28 | 20 pips multiplied by A$0.664 per pip, using the conversion rate above. |
| Swap | A$0.00 | No swap is charged because the position is closed before the daily rollover. |
Your broker may round the pip value, apply its own conversion rate, and charge a spread or commission on top. Those amounts vary between brokers, so check the contract specifications before you trade.
Doing it once, step by step
The walkthrough below takes one AUD/USD day trade from the session clock to the closing order, using the numbers already on this page. Work through the steps in order, and treat each one as a check rather than a task.
- 01
Note the rollover hour
Find the daily rollover time on your platform and write it down in your own time zone. This is the deadline by which the position must be closed to remain a day trade. If the platform shows a different zone, convert it once and keep the converted figure. Every later step depends on this one number.
- 02
Read the spread before the move
Look at the gap between the buy price and the sell price on AUD/USD. At around 0.6640 this gap is small but present, and it is your first cost. Check whether your broker also charges a commission per lot, because that changes the total. Both figures vary between brokers, so use the ones your platform shows.
- 03
Choose the position size
Decide the lot size before you look at the profit you want. At 0.6640, one pip on one standard lot is about A$6.64, so 0.10 lots gives about A$0.664 per pip and 0.20 lots gives about A$1.328 per pip. The size sets how much each pip is worth in dollars. It does not change the direction of the price.
- 04
Write both exit levels
Set a price where you will close at a loss and a price where you will close at a profit. Write both beside the rollover hour from the first step. These are the only two prices at which you will act. If the price reaches neither before the session ends, you close at the market and the trade is still a day trade.
- 05
Open the position
Place the order at the size you chose, and confirm the entry price on the ticket. Your position now shows a small loss equal to the spread, which is normal. From this point the plan is fixed and the only remaining action is to wait for one of the two levels.
- 06
Close before the session ends
Close the position when either level is reached, or at the latest before the rollover hour. Confirm the closing price and compare it with your two written levels. The difference between entry and exit, in pips, multiplied by your pip value, gives the gross result. Costs are subtracted from that figure, and those costs vary between brokers.
The mistake most people make here
The common mistake is to treat a day trade as a way to avoid risk, because no swap is charged and the position is closed by the evening. The absence of a swap does not remove the risk of the price moving against you while the market is open. Instead, decide your exit before you enter: a price level where you will close at a loss, and a price level where you will close at a profit. Write both down, and close the position before the session ends as planned.Check yourself
You open 0.20 lots of AUD/USD at 0.6640 and close at 0.6655. How many pips did you gain, and what is the gross result in A$?
The move is 0.6655 minus 0.6640, which is 0.0015, or 15 pips. One pip on one standard lot is 10 units of the quote currency; at 0.6640 that is about A$6.64 per pip. For 0.20 lots the pip value is about A$1.328. Multiply 15 pips by A$1.328, which gives about A$19.92 before costs.
You open 0.05 lots of AUD/USD and the price falls 12 pips. What is the gross loss in A$, using the same conversion rate?
One pip on 0.05 lots is about A$0.332. Multiply 12 pips by A$0.332, which gives about A$3.98 before costs.
Questions that come up next
What exactly is the rollover time and where do I find it?
Rollover is the fixed hour each day when your broker closes the trading day and applies swap to any position still open. It is not the same everywhere. Each broker sets its own rollover hour, and it varies between brokers. Look for it on your platform's contract specification page or in the market hours list. Write it down next to your screen, because that single time decides whether a position counts as a day trade or an overnight one.
If I close before rollover, do I still pay anything besides the spread?
You avoid swap, because swap is only charged on positions held through rollover. You do not avoid the spread. The spread is paid the moment you open, since your position is valued at the other side of the gap. Some brokers also charge a commission per lot on top of the spread. Both the spread and any commission vary between brokers, so check your own platform's fees before you trade.
How do I work out my pip value for a position size I have not used before?
Start from the standard lot figure. One pip on one standard lot of AUD/USD is 10 units of the quote currency, which at 0.6640 is about A$6.64. Divide that by ten for a 0.10 lot, giving about A$0.664 per pip. For any other size, multiply the standard lot figure by your lot size. Your broker may round the result or use its own conversion rate, so the figure on your platform can differ slightly.
Can I use a stop loss and still call it a day trade?
Yes. A stop loss is a price level where you have decided to close at a loss. It does not change the definition of a day trade, which is only about the clock. What matters is that the position is opened and closed inside one session. If your stop is hit before rollover, the trade still ends that day. If it is not hit, you close manually before the session ends as planned.
What happens if I forget to close and the position goes past rollover?
It stops being a day trade and becomes an overnight position. Swap is then applied, and the cost rules change. The price can also move against you while you are not watching. That is why the rollover hour is worth writing down. If you cannot see it, you cannot tell which cost rules apply to the position you just opened.
Does a smaller position size make day trading less risky?
It reduces the dollar amount you can lose on a given move, because pip value scales with size. It does not remove the risk of the price moving against you. A 12 pip fall on 0.05 lots is about A$3.98, while the same fall on 0.20 lots is about A$15.92. The market move is identical; only the amount at stake changes. Decide your exit levels before you enter, whatever size you choose.
The words used on this page
- Session
- The window in which your platform accepts orders for a market, ending at a fixed hour each day. For AUD/USD the busiest window runs from the Sydney morning to the close of the New York afternoon. Outside it the price still moves, but far fewer orders are changing hands.
- Rollover
- The daily hour when your broker closes the trading day and applies swap to positions still open. It is set by the broker and varies between brokers. A position closed before it is a day trade; one held past it is an overnight position.
- Spread
- The gap between the price at which you can buy and the price at which you can sell. On AUD/USD around 0.6640 it is usually a fraction of a pip, but never zero. You pay it the moment you open, because your position is valued at the other side of the gap.
- Commission
- A fee some brokers charge per lot traded, on top of the spread. Other brokers widen the spread and charge no commission. The two models can produce a similar total, and both vary between brokers.
- Pip value
- The money one pip of movement is worth for your position size. One pip on one standard lot of AUD/USD is 10 units of the quote currency, about A$6.64 at 0.6640. It scales with size, so 0.20 lots gives about A$1.328 per pip.
What to take away
- A day trade is defined by the clock, not by the calendar: opened and closed inside one session, before the daily rollover.
- No swap is charged on a day trade, but the spread and any commission are paid on every position, and both vary between brokers.
- Pip value scales with position size, so the same price move produces a different dollar result on 0.05 lots and 0.20 lots.
- Every decision is made while the price is live, so write your exit levels before you enter and close before the session ends as planned.