Day Trading Strategies
Day Trading is one of the most challenging tasks which require perfect trading plans and methodologies. Success in day trading demands mental focus, analysis and technical precision. The key points for making continuous progress demands a lot of planning and constant analysis of graphs, charts and price movements.
Most of the time people try to follow many different strategies at the same time which results in loss of money. Day Trading demands close attention on the stock market. Attempting to process huge pieces of data is hard, and will divert your attention from your methodology. Your strategy wouldn’t remain effective.
While you want to implement a strategy that works for you, try to follow the same planning throughout the day without any modifications. Most of the time beginners lose money when they try to put together their own approach.
Following are best trading strategies which are used by most of the day traders:
In Scalping, a trader or a scalper buys or sells stocks more than once, or sometimes even hundreds of times a day. A trader using a scalping method usually deals with very large volumes of shares.
These types of traders stay very active, and the reason is that they aim to make multiple small profits of a large amount of trades and that these small profits sum up to big profit at the end of the day.
2. Daily Pivots:
Daily Pivots is most commonly used trading strategy. Pivot points are used to determine the support and resistance level. The Pivots points are important to determine the trend of the overall market, the entry point by analysing graphs, tables and previous records. Pivot Point is calculated using the following formula:
Central Pivot Point (P) = (High + Low + Close) / 3
The high, low and closing prices are taken from the previous trading day.
Fading is a counter-trend trading approach in which the trader will be buying when the prices are falling, and selling when the prices are rising. This investment strategy requires the trader to go completely against the trend.
This methodology can be beneficial for day traders, but this strategy is based on some insights which are as follows:
- Overbuy of shares in the market.
- Early buyers those want to gain maximum profit.
4. Analyzing, Tweaking Trading Strategies:
In the beginning, new day trader thinks that he can make the profit with insignificant efforts and strategies, but in reality, day trading is very complicated. By implementing consistent and well-defined methods they can increase the chance of success. In this strategy, the trader analyses the profit and loss rates.
Evaluation of tweaking performance in day trading is quite challenging. Most informal investors study the rates of profit and losses and draw their result on the graph. By analysing the graphs statistics, they make their decisions about the market.
5. Momentum Reversal Trading Strategy:
The strategy works by examining the combination of technical analysis and market fundamentals. It requires a broker to examine traded currency to build up mid to long haul trend.
This mechanism uses the information of price moves and values of market reversals. The system permits the trader to enter the market when the price is low and gives a considerable benefit potential through money management.
All exchanges are planned and decided in advance. The system functions admirably on all significant US Dollar crosses. It creates between 1-5 signals in each month. All exchanges are entered and held for several weeks. The Momentum Reversal Trading Strategy has been adopted for the last two years.
This methodology utilises a couple of indicators which are as follows:
- Fibonacci retracements
- Stochastic Oscillator (multi-time span)
After building your potentiality and long-haul drift through commitments of traders report, charts, diagrams and search for price inversion stage.
To define the price reversal status trader has to cut apart the price on diagrams first and answer some straightforward questions like:
- Is the market price falling or not?
- Is the graph showing over-bought or over-sold?
6. Heikin-Ashi Candles:
Heikin-Ashi candles is somewhat an extraordinary method for reviewing the business sectors. Heikin-Ashi policy uses the concepts of the candle in which the value of candle is ascertained by analysing previous candle chart patterns. The price action of each candle is influenced by the earlier candle value. This chart is somewhat slower as compared to candle outline chart.
7. Forex Trading Technique:
Forex trading techniques are mostly based on technical analysis, chart patterns, fundamental analysis or news based to plot whether to buy or sell a currency pair at the given time frame. These strategies can be either automated or be created manually for trading signals that will initiate the buying and selling.
Manual buying and selling will require the forex trader to sit continuously in front of the computer and watch for trading opportunities whereas in automation he can develop a particular algorithm which will automatically find trading signals and execute the trade in the forex market.
Some of the essential components of an effective forex trading strategy are Position sizing, Selecting the correct currency pair, Entry and Exits points & good tactics.