Day trading is completely legal in Canada. Although Canadian brokers don’t require any minimum capital to start trading, unlike the U.S where brokers demand a minimum Capital of $25,000. The tax implications of day-trading are different from buying and selling regular shares.
Day Trading or Intraday trading is considered a type of trading where an individual squares off all the positions before the end of a trading session. Intraday traders are moreover speculators who capitalize on the small intraday price movement of the security. It can be performed on stocks, options, commodities, or any asset.
In short, Yes, day trading is legal in Canada. Day trading is a completely legal and ethical practice. In the U.S, brokers demand a minimum of $25,000 in your trading account in order to start day trading. But there are no such rules in Canada. You can start executing intraday trades with as little as $1,000 in your trading account.
Profits generated from Day trading are not considered under Capital gains. Whenever you purchase a stock and hold it for more than one day and less than one year, Short Term Capital Gains (STCG) tax is applicable to it. In this case, as you are selling the security within one day, it is counted under speculative activities and taxed as “Business Income”.
Day trading is an extremely risky form of trading. Due to this risky nature, many brokers set a minimum capital requirement to allow individuals to start day trading. Brokers also provide leverage on day trades which makes it even riskier if the trader's view goes wrong. Apart from the risks, the losses made from day trading are treated as ‘Business losses' and can be deductible from profits to reduce taxation.
It is important to note that one will be penalized if day trading is done within a Tax-Free Savings Account offered by the Canadian federal government.
Trading is very risky because it involves a lot of volatility, so it is important to have proper entry and exit strategies in place before beginning.