One of the best investments you can make today has got to be in day trading. Here, there are no shortcuts, and you will need to put in the work required to be successful. That’s why you need to have day trading strategies that can help you.
When you have these strategies, you will easily avoid expensive pitfalls. Day trading can have its fair share of losses if you aren’t careful on your moves. Below are some of the strategies you can use to ensure no pitfalls you fall into when day trading.
Momentum Trading
The first strategy you need to be looking at is this one. It is also the one you hope will be happening daily, but it’s a pretty rare occurrence. Momentum trading is when jumping on a stock whose price is moving up – this is one of the hardest trades to find.
When you’re getting into day trading, you will hope it happens as often as possible, but it doesn’t. The odds are usually stacked with only 10 out of 5000 fits this bill. You need to have the right timing and plan to spot such a strategy.
- Stock movement of 30% and above
- A significant move in price – can be caused by several things
- Stocks that trade faster as a result of a reduced number of outstanding shares
- Trends
Pullback Trading
In this strategy, you will need to look at the stock that has an established trend. You will then need to monitor the direction until the price declines from the movement. At this point, when you jump in, as you know, the price will go up at some point.
If you have noted the trend of the stock is an upward one, the pullback is your entry point. You don’t need to be in fear that the price will keep on going down. You will need to be patient if you are to make this strategy work for you.
You will need to use technical charts if you are to understand the trend here.
Scalping
If you are ever going to use this strategy, you will need to be confident, though. You will need to make quick decisions here and act on them, which can sometimes be bad decisions. When you search to find a winning strategy, scalping has got to be part of the equation. This strategy has a great concept, and it is one you will need to implement most of the time. It involves choking up small wins as they add up to a lot by the day’s end.
As a scalper, you will set buy and sell targets for your trades. You will then have to stick out with these predetermined levels throughout the day. Here, you can make some trades within seconds – that’s how fast the strategy can work for you.
News Trading
Several things determine stock prices, and news is just one of them. Stocks will react quickly to news events like poor earnings reports – this can cause the price of a stock to drop. Other times, if you are looking to buy into a pharmaceutical stock, approval means the price will go up.
You need to keep an eye out for the news at all times if you are to capitalize on this. When there’s bad news, you may short the stock by borrowing shares of the stock from the investment firm and selling the borrowed shares.
Breakout
This is another technical strategy, one that isn’t as easy as looking at a chart. A breakout happens when stock prices rise above their highest former resistance price. What you need to do here is to look at the levels of stocks trading volume and how many shares are changing hands.
Breakout stocks with higher volume are likely to be more sustainable at the new price.
Reversal
Here, what you will be doing is going against the trend. Like most trades above, you will be going to the stocks that show promise; here, you are going for the dropping one. But it needs to show promise of a turnaround at some point.
This is a dangerous strategy for any beginner; it needs some experience to execute successfully.
Using Pivot Points
With this strategy, it is most effective for those who are in forex trading. Here, you use the previous day’s market to determine your today’s trades. You are looking at the highs and lows of the last day to calculate the pivot point.
As a day trader, several strategies can be used to make the whole thing work. These are just a few that you need to look at implementing closely.
