10 Day Trading Strategies You Should Know
1.Day Trading: An Introduction
2.10 Day Trading Strategies You Should Know
3.What Tools and Services You Need for Day Trading?
4.What are the Best Day Trading Stocks?
5.The Final Thoughts
1.Day Trading: An Introduction
With the rise of the Internet and online trading, it has become easier for individuals to trade actively in the stock market. Earlier only large financial institutions and brokerages were used to trade stocks and other instruments. Today, day trading has turned out to be a lucrative option but it can also be a little challenging for beginners. The stock market is full of experiences where some are profitable while others may be rough patches.
What is day trading?
Day trading refers to the practice of purchasing and selling security pithing a single trading day. Though day trading may occur in any marketplace, foreign exchange (forex) and stock markets are the most common places. Most day traders use short-term trading strategies and keep a close eye on small price movements to make big profits. Also, they are well-versed with the events that cause short-term market moves.
In simple words, day trading is the buying and selling of various instruments to make a profit on the same day.
How does day trading works?
Day trading can be done in many different ways and the styles range from short-term trading to longer-term swing and position trading. In short-term trading, the positions are only held for a few seconds or minutes whereas in longer-term trading a position may be held throughout the trading day. As day trading involves making short-term trades, it never lasts more than one day in the financial markets.
Furthermore, different trading markets require different capital requirements. Though stocks are popular, they are the most capital intensive. Forex trading can be an ideal choice if you have limited capital. It also has some hardware and software requirements such as a computer and high-speed Internet access. Having more than one monitor makes it easier to keep tabs on multiple trading charts.
2.10 Day Trading Strategies You Should Know
Before we start discussing day trading strategies, we would like to mention that no strategy comes with guaranteed success. Several factors plan a crucial role in ensuring the success of a strategy such as market conditions. Hence, day traders need to understand the market and practice multiple strategies.
Here are 10-day trading strategies you should know…
1.Do Your Homework: As knowledge is power, it is important to gather as much information as possible before entering the day trading market. Stay up to date on the latest news and events to make a list of all the stocks you’re interested in trading. Also, know about the companies and markets by visiting their websites.
2.Decide How Much You’re Willing to Risk: Know how much capital you’re willing to risk in day trading. Most experienced day traders risk 1-2% of their account for each trade but it is also important to set aside funds. Set aside a surplus amount of funds that you’re prepared to risk as a loss may or may not happen.
3.Make a Plan & Stick to it: Everything starts with planning and so should be your day trading strategy. Make a strategy that you can follow closely and your plan should be backed with proper research and understanding of the stock market. The thumb rule is to follow your plan rather than chasing just profits.
4.Create Realistic Goals: Be realistic about profits and keep in mind that you won’t win with every trade. It is all about the balance where you win some and loses some which also means that you can make more on those wins than you lose. It will be also wise to limit the risk of each trade to avoid heavy losses.
5.Use Limit Orders: Cut losses with limit orders and you can do this by deciding what type of orders you will use for day trading. You can either use market orders or limit orders to enter and exit trades. A limit order is a type of order to buy a stock at a specified price and it helps you trade precisely while avoiding losses.
6.Don’t Rush, Start Small: If you’re new to the field, don’t rush things and start by focusing on just one or two stocks. By starting small with just a few stocks, you will be able to better track and find opportunities. Also, this will make it easier to monitor the current market position and spot opportunities.
7.Scalping and Fading: Scalping involves trading as soon as a trade becomes profitable and this strategy is effective as long as you are quick to curtail losses and the majority are profitable. As far as the fading strategy is concerned, it involves short selling stocks with rapid upward movement, expecting that other investors may take a long position.
8.Time is Everything: Apart from analyzing the market, timing is extremely important and plays a crucial role in day trading. As soon as the market opens, pricing can be volatile in the early 15 to 20 minutes. It will be wise to consider not making trades within this time slot if you’re new to the field and it is best to stick to the middle hours of the day.
9.Momentum Trading: It is often said that success in day trading can be achieved by investing in stocks that have momentum. The stocks that have momentum typically move around 20-30% every day. The strategy is to find them early and invest in them before they make the move and that movement can either upward or downward direction.
10.Breakout Trading: One of the most commonly used day trading strategies on which you identify times when the stock prices change. The stock prices either rises above or falls below specified levels with an increase in the trading volume. You can enter into a long position or invest in a stock if the prices rise and vice versa.
3. What Tools and Services You Need for Day Trading?
If you are interested in day trading, you will need a set of tools and services to do the job effectively. As modern-day trading is electronic and done via the Internet, there are many tools that you can use to get the job done. It is good to have a telephone to connect with your broker and a computer or laptop to access the Internet and make trades.
Other tools include a direct access brokerage, a trading-charting platform, and real-time market data. Here’s the detailed information about the tools you need:
-Computer or Laptop: With technology constantly changing, having a computer or laptop has become a necessity for day trading. Make sure that your computer has enough memory and a fast processor so there is no lag, crash, or stalling.
-Charting Software: There are many software options that you can use to trade and monitor the price charges of financial assets. Try to use software that can easily pull up price charts and come with an option to view tick charts and time charts.
-Internet Access: With the increasing use of technology, having a fast enough Internet is of utmost importance. To receive market data and make informed decisions, access to high-speed Internet has become a necessity.
-A Telephone: Though Internet has become a necessity for trading, it is also important to have a telephone to contact your broker other than email. You can either have a landline or cell phone with your broker’s number programmed into your phone.
4. What are the Best Day Trading Stocks?
When you look at a price chart, it seems like it should be pretty easy to make money but it is not that simple as ABC. However, knowing the best day trading stock provides an opportunity to make a profit in day trading.
To make things a bit easier for you, we’ve created a list of best day trading stocks and ETFs…
-Twilio Inc. (TWLO)
-Tesla Inc. (TSLA)
-Etsy Inc. (ETSY)
-Roku Inc. (ROKU)
-Basic Energy Services Inc. (BAS)
-Financial Select Sector SPDR Fund
-iShares China Large-Cap ETF
-iPath S&P 500 VIX Short-Term Futures ETN
-William Delbert Gann
-Paul Tudor Jones
5. The Final Thoughts
With a proper understanding of day trading and following the strategies, you can not only explore the opportunities but make a good profit. However, there’s nothing like easy money in day trading as you need to keep a close eye on what’s happening in the stock market.
If you’re looking to earn a profit through day trading, you need to put both your time and efforts. The best way is to seek help from experienced day traders or brokerage firms or investors. It is also a good idea to consider training and tools for effective day trading.
Deciding what and when to buy plays a crucial role and the main three things you need to look for include Liquidity, Volatility, and Trading Volume. Once you know what kind of stocks or other financial instruments you’re looking for, you can use start with day trading.
When trading in financial markets, you will encounter many trading strategies. However, not every strategy will work for you. It hints that you will need to do some research to find out what works for you and the best way is to mix them up.
Are you ready for day trading?