Day trading
What you learn in 3 minutesDay trading means opening and closing a position inside one session, so you do not pay or receive swap for holding it overnight. The trade still costs you money in spread and commission, and every decision is made while the price is moving. This lesson compares two ways to run one EUR/USD day trade and shows what each one leaves in your account in KSh.
One day on EUR/USD: 20 pips, two outcomes
| Step | Amount | Note |
|---|---|---|
| Instrument and price | EUR/USD near 1.0850 | The example rate used for every calculation below. |
| Position size | 0.10 lots | One tenth of a standard lot, so one tenth of the pip value. |
| Pip value on this size | KSh 129 | One pip on one standard lot is 10 US dollars; on 0.10 lots it is 1 US dollar; converted at 129 KSh per US dollar. |
| Move in the planned case | 20 pips in your favour | 20 x KSh 129 = KSh 2,580 before costs. |
| Spread cost | KSh 258 | A 2 pip spread is paid on entry and exit, so 2 x KSh 129. |
| Planned case, after spread | KSh 2,322 | KSh 2,580 minus KSh 258. |
| Move in the rushed case | 12 pips against you | Closed in a hurry before the session ends: 12 x KSh 129 = KSh 1,548. |
| Rushed case, after spread | minus KSh 1,806 | KSh 1,548 loss plus KSh 258 spread. |
Your broker may round the pip value, add a commission per lot, or quote a wider spread near the daily close. Swap is not charged on a position closed the same day, but any broker can change its own costs, so check the contract specifications before you size a trade.
The mistake people make here
The common mistake is to open a day trade without deciding the exit first, then hold it into the evening hoping it turns around. That turns a planned day trade into an overnight position, which can carry swap and a gap risk you never agreed to. Before you click buy or sell, write down the price where you will close for a loss, the price where you will close for a gain, and the time you will close either way. If the session ends and neither price was hit, close at the time you wrote down.Check yourself
You trade 0.20 lots of EUR/USD and the price moves 15 pips in your favour. Using KSh 129 per pip on 0.10 lots, what is the gross result in KSh?
0.20 lots is twice 0.10 lots, so one pip is 2 x KSh 129 = KSh 258. Then 15 x KSh 258 = KSh 3,870 before costs.
The same 0.20 lot trade pays a 2 pip spread. What is the net result in KSh?
The spread costs 2 x KSh 258 = KSh 516. Net result is KSh 3,870 minus KSh 516 = KSh 3,354.
Why does a position closed inside the same session avoid swap?
Swap is charged for holding a position through the overnight rollover. If you open and close before that point, the position is not held overnight, so no swap is applied.