Top Strategies Day Traders Adopt
InvestorEducation / Learn to Trade Oct 14, 2020 - 12:08 PM GMTBy: Submissions
Day trading is an act where you buy and sell financial instruments on the same day. You can also decide to trade multiple times during the course of the day. In the day trading, investors take advantage of the small prices, and results can be lucrative after playing correctly. However, this is a dangerous game, especially for those who are not familiar or inexperienced investors. It is a threat to an investor who utilizes it without having a well-thought strategy.
Day trading does not suit all brokers. But some brokers are designed to have day trade in their mind such as day-traders.net that accommodates investors who want to day trade.
When choosing an online broker, get those having professional and advanced versions in their platforms. Such features advanced charting tools, real-time streaming quotes, and the ability to enter or modifying complex orders.
Below, let's look at some strategies adopted in day trading.
- Reversal
Reversal is a hotly debated strategy but dangerous to be used by a beginner. However, it is a recommend day trading strategy being used across the world. Reversal trading refers to trend trading, reversion strategy, and pull back trending.
Reversal strategy tries to defy the basic logic because your aim is trading against the trend. Therefore, you should accurately identify possible pullback as you try to predict your strength. However, to succeed with this strategy, you should have in-depth market skills and experience.
- Breakout
This is a popular type of day trading many investors are adopting. It centers around the moment the price will clear to a specific level in the chart after an increased volume. Here, the breakout trader requires to enter into a long position the moment the security or asset will break above resistance.
On the other hand, you have to enter into a short position the moment the stock will break below support. When a security or asset trades above a certain price barrier, prices tend to trend towards the breakout direction while volatility continues to increase.
The best way for this strategy to work perfectly is to locate the correct instrument to trade. If you have to do this, always remember resistance levels and asset support. The more the prices will hit these points frequently, the more critical and validated they will become.
Entry Points
It is a nice and straightforward part. When the prices set are about to close, but above resistance levels, they will need a bearish position. When the prices are set and ready to close, but below a support level, they will need a bullish position.
Planning Exits
The recent asset performance should establish a reasonable price target. Therefore, with the help of chart patterns, you can make the process accurate. You need to get the average of the recent price swings to be able to create a target.
In case the average price swing is 3 points over previous price swings, it can be a sensible target for you. After reaching that goal, it will be the right moment for you to exit trading and have time to enjoy your earnings.
- Using Pivot Points
The pivot point is a fantastic day trading strategy where you have to identify and act on critical support and resistance level. This strategy works perfectly in the forex market. Moreover, it is a suitable strategy for range-bound traders who aims at identifying entry points. Breakout and trend traders use this strategy when they want to local critical levels they need to breakout.
- Momentum
Momentum is a day trading strategy suitable for beginners. It revolves around acting on identifying substantial trending moves from news sources by supporting high volume. In the trade, there will be one stock that will move approximately 20 percent to 30 percent each day, giving you an ample opportunity. Therefore, you have to hold your position up to the moment you can see reversal signs to get out.
The other alternative is where you fade the price drop. With this method, you have to round your price target the moment the volume starts diminishing.
It is, therefore, a simple but effective strategy when adequately utilized. But, you should be cautious about the upcoming news of earning announcements. Within a few seconds of each trade, it can bring differences at the end of the day's profits.
- Scalping
Scalping is a popular day trade strategy. Mostly, this strategy works best in the forex market, where it aims at capitalizing on minute changes in prices. Here, the driving force is usually the quantity. You aim at selling the moment trade will become profitable.
However, scalping is an exciting and fast-paced way of trading. The downside of this strategy is that it is much riskier. However, to consider this strategy, you should have a high trading probability that will help you out with the risk vs. reward ratio.
You have to be keen on volatile instruments, be ready for timing, and check attractive liquidity. Don't wait for the market, but you have to close your losing trades as earlier as possible.
Learning Methods
Blogs: Online blogs are among the places you can get the best strategies for day trading.
Videos: There are different ways to learn day trading strategies. Some find videos being useful.
Forum: Forum is also a perfect place for people to gather knowledge on day trading. That is through commenting and asking questions. Besides, you'll get some easy methods for everyone to use.
The Final Verdict
The profits you get will hugely depend on the skills and strategies you employ. Therefore, you have to keep in mind that you need a straightforward strategy that will give you success, either interested in NSE or gold.
Another thing to consider is technical analysis. You have to admit it because it plays a vital role in validating your strategy. Besides, when you choose an earlier entry or even at the end of day trading strategies, you have to control your risks. Lastly, what is essential is to develop an effective plan and be patient.
By Mark Adan
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