Intermediate Level

Learn more complex tools and techniques that will help you in trading.

Lesson 1: Day Trading

Strategies

Day
trading strategies are crucial if you want to capitalize on regular, tiny price
movements. Consistent, efficient approaches depend on in-depth technical
analysis, use of graphs, indices and patterns to forecast future price
movements. This page will offer you a thorough breakdown of beginner trading
strategies, working all the way to advanced, automated, and even asset-specific
strategies.

It will
also outline some of the regional variations that you need to be conscious of,
as well as point you in the direction of some helpful resources. At the end of
the day, however, you’ll need to discover a trading strategy that fits your
particular trading style and requirements.

Trading
strategies for beginners: Before you get stuck in a complicated globe of
extremely technical indices, concentrate on the basics of a straightforward day
trading strategy. Many have erred by believing that you need a very complex
approach to succeed intraday, but often the simpler, the more efficient.

The Basics

Incorporate
the invaluable components below in your approach.

Money Management – Before you begin, sit down and
decide how much risk exposure you’re prepared to take. Keep in mind that most
effective traders will not bring more than 2% of their assets on the line per
trade. If you want to be around when the wins start rolling in, you have to
prepare yourself for some falls.

Time management – Don’t expect to create a fortune
if you just spend an hour or two a day on trading. You need to keep a constant
eye on the markets and be on the lookout for business possibilities.

Start tiny – While you’re discovering your
legs, stick to a maximum of three assets in a single day. It is better to get really
good at a few, than to be average and not see a lot of return.

Education – Comprehension of market
intricacies is not enough, you also need to remain informed. Make sure you
remain up-to-date with business news and any activities that will affect your
asset, such as a change in economic policy. You can discover a wealth of internet
economic and company resources that will keep you informed.

Consistency – It’s more difficult than it
appears to keep your feelings at bay when you’ve had five coffees and you’ve
been staring at a screen for hours. You need to allow math, logic, and strategy
guide you, not nerves, fear, nor greed.

Timing – The market will become unstable
when it opens, on a daily basis, and while experienced day traders may be able
to read patterns and benefit, you should bide your time. So, hold back for the
first 15 minutes, you still have hours to go.

Components Every Strategy Needs

Whether
you are following automated day trading strategies, or beginner and advanced
tactics, you’ll need to take into consideration three key parts: volatility,
liquidity, and quantity. If you’re going to make cash on small price movements
it’s essential to have the correct tools. These three components are going to
assist you in making that choice:

Liquidity – This allows you to quickly enter
and exit trades at an appealing and stable cost. For instance, liquid commodity
policies will concentrate on gold, crude oil, and natural gas.

Volatility – This informs you of your
prospective variety of profits. The higher the volatility, the higher the
probability of profit or loss you can create. One such instance is the
cryptocurrency market, which is well known for its elevated volatility.

Volume – This measure will tell you how
many times the stock/asset has been traded within a specified period of time.
For day traders, this is better known as, “average daily trading volume.” High
volume informs you that there is a substantial interest in the asset or safety.
The rise in volume is often an indication of a price jump, either up or down,
that is quickly approaching.

5
Day Trading Strategies

1.
Breakout

Breakout strategies center around when the price reaches the
given amount on your graph, with enhanced quantity. The breakout trader reaches
a long position after the asset or safety breaks over the resistance.
Alternatively, you join a short position as soon as the inventory falls below
the resistance.

After an asset or safety transaction goes beyond the
designated price threshold, volatility generally rises, and prices often move
in the direction of a breakout.

You need to locate the correct trade tool. When doing this,
bear in mind the level of support and resistance of the asset. The more often
the price hits these points, the more validated and significant they become.

Entry
Points

This portion of the game is lovely and simple. Prices set too
close and above the rates of resistance involve a bearish stance. Prices set too
close and below the support level need to be bullish.

Plan
your exit

Use the latest output of the asset to set a decent price
target. Utilizing chart patterns will make this method even more precise. You
can calculate the average latest price swings to set a goal. If the average
price swing had been 3 points over the last few price swings, this would be a
reasonable destination. Once you have reached that objective, you can exit the
trade and make a profit.

2.
Scalping

Scalping is one of the most common methods. It’s
particularly common in the Forex Market, and appears to capitalize on minute
price modifications. The driving force here is quantity. You will be looking to
sell as quickly as the trade becomes lucrative. It’s a fast-paced and
interesting way to trade, but it can be dangerous. You need a high trading
probability to outperform a low danger vs. reward ratio.

Be on the
lookout for volatile tools, appealing liquidity, and time-consumption. You can’t
wait for the market, you need to close your business loss as quickly as you
can.

3.
Momentum

Popular among beginners’ trading strategies, this approach
focuses on acting on news sources and identifying significant trends with
high-volume assistance. There’s always at least one stock that moves around
20-30% every day, so there’s plenty of chance. You just hold on to your
situation until you see signs of inversion and then get out of it.

This approach is easy and efficient when used properly.
However, you need to make sure that you are conscious of upcoming news and
income announcements. Just a few seconds on each trade will make all the
difference to your profits at the end of the day.

4.
Reversal

Although hotly discussed, and possibly hazardous when used by beginners,
inverse trading is used all over the globe. It is also known as trend trading,
pull back trending, and mean reversal approach.

This approach challenges the fundamental logic as you aim to
trade against the trend. You need to be able to correctly define possible
drawbacks, plus predict their power. You need an in-depth market understanding
and experience to accomplish this efficiently.

The “daily pivot” approach is regarded to be a distinctive
case of inverse trading, as it focuses on purchasing and selling small and high
pullbacks / reverses on a regular basis.

5.
Using Pivot Points

A pivot point trading day approach can be great for defining
and acting on critical support and/or resistance levels. This is particularly
helpful in the Forex Market. In addition, range-bound traders can be used to
define entry points, while trend and breakout traders can use pivot points to
find important stages that need to be broken for a move to count as a breakout.

Calculating
Pivot Points

The pivot point is described as the rotation point. You use
the high and low rates of the prior day, plus the safety closing cost, to
calculate the pivot point.

Note: If you calculate a pivot point using price data over a
comparatively brief timeframe, precision is often lowered.

So, how do you calculate a pivot point?

  • Central Pivot Point (P) = (High + Low + Close) / 3

You can then calculate support and resistance levels using
the pivot point. To do that you will need to use the following formulas:

  • First Resistance (R1) = (2*P) – Low
  • First Support (S1) = (2*P) – High

The second level of support and resistance is then
calculated as follows:

  • Second Resistance (R2) = P + (R1-S1)
  • Second Support (S2) = P – (R1- S1)

Application

When applied to the FX Market, for example, you will
discover that the trading range for the session often takes place. This is
because this range is played by a large number of traders.

It is also worth noting that this is one of the technologies
and techniques that can be applied to indexes as well. For instance, an
efficient S&P day trading approach can assist.

Limit
Your Losses

Limiting your losses is particularly crucial if you use the
margin, and a requirement that is generally high for day traders. When you
trade marginally, you are increasingly susceptible to sharp price movements.
Yes, that implies the potential for higher profit, but it also implies the
possibility of important losses. Luckily, you can create stop-losses.

Stop-loss monitors your danger to you. In a short position,
you can place a stop-loss above a latest high, you can place it below a latest
low for long positions. You can render it dependent on volatility, too.

For example, the stock price moves by £0.05 per minute, so
you place a stop-loss £0.15 away from your order of entry, enabling it to swing
(hopefully in the anticipated direction).

One of the common strategies is to set up two stop-losses.
First, you place a physical stop-loss order at a particular price level. This
is going to be the most money you can afford to lose. Second, you’re creating a
mental stop-loss. Place this at the stage where your registration requirements
have been violated. So, if the trade is going to create an unanticipated turn,
you’ll create a quick exit.

Forex
Trading Strategies

Forex strategies are of a dangerous nature as you need to
collect your earnings in a brief period of time. You can apply any of the above
methods to the Forex Market.

Cryptocurrency
Trading Strategies

The interesting and unpredictable cryptocurrency market provides
plenty of possibilities for day-to-day traders. You don’t need to comprehend
the complicated technical structure of Bitcoin or Ethereum, nor do you need to
have a long-term perspective of their viability. Simply use the more simple
approaches to make the most of this volatile market.

Stock
Trading Strategies

Stock trading strategies are based on many of the same
principles described throughout this section, and you can use many of the
strategies described above. Below, though, is a particular approach that you
can apply to the stock market.

Moving Average
Crossover

You will
need three moving average lines:

  • One set at 20
    periods
     – This is your fast-moving average
  • One set at 60
    periods
     – This is your slow-moving average
  • One set at 100
    periods
     – This is your trend indicator

This is
one of the moving average approaches that produces a purchase signal when the
quickly moving average passes and the slow-moving average. The sell signal is
produced merely when the quick moving average is below the slow-moving average.

So, you’re
going to open the place when the moving average row comes in one direction and
you’re going to close the place when it comes back in the reverse direction.

How can
you tell that there’s definitely a trend? You understand the trend is when the
price bar remains above or below the 100-period line.

Spread Betting Strategies

Spread
Betting enables you to speculate on a vast amount of worldwide markets without
actually owning the asset. Plus, the strategies are comparatively simple.

CFD Strategies

Developing
an efficient day-to-day trading strategy can be complex. However, opt for a
tool such as a CFD and your work may be a little easier.

CFDs are
worried with the distinction between the entry and departure of the trade.
Recent years have seen a rise in popularity. This is because you can make a
profit when the underlying asset moves in relation to the position taken,
without ever getting to own the underlying asset.

Regional Differences

Distinct
markets come with distinct possibilities, and distinct barriers to overcome.
Day trading strategies for the Indian market may not be as effective when
applied in Australia. For example, some countries may be distrustful of the
news, so the market may not react in the same way as you would expect them to.

Regulations
are another factor to be considered. Indian strategies may be tailored to suit
particular regulations, such as elevated minimum equity balances in margin
accounts. So be sure to get online and check out obscure regulations to ensure
they won’t have any effect on your approach, before you put your hard-earned
cash on the line.

You may
also discover that distinct nations have distinct tax loopholes to jump
through. If you are based in the west but want to apply your ordinary day
trading policies in the Philippines, you need to do your homework first. What
kind of tax do you have to pay for? Are you going to have to pay it overseas
and/or domestically? Marginal tax dissimilarities could have an important
effect on your day-to-day profits.

Risk management
Stop-loss

Strategies
that take risks into consideration when working. If you don’t handle the risk,
you lose more than you can afford to and will be out of the game before you
realize it. That’s why you should always have a stop-loss in place.

The price
may seem to be moving in the direction you anticipated, but it could be
reversed at any moment. Stop-loss controls that danger. You’re going to exit
the trade and only incur a minimal loss if the asset or security doesn’t come
through.

Savvy
traders generally do not risk more than 1% of their balance of accounts in a
single trade. So, if you have £27,500 in your account, you could risk up to
£275 per trade.

Position
size

You will
also be able to pick the ideal position size. The volume of the position is the
number of shares carried in a single trade. Take the distinction between the
entrance fee and the stop-loss price. For example, if your entry point is £12
and your stop loss is £11.80, then your risk is £0.20 per share.

Now, to
figure out how many trades you can make in a single trade, divide £275 by
£0.20. You can hold up to 1,375 shares in a situation. This is the highest
position you could take to stick to your 1% risk threshold.

Also,
check that there is adequate volume in the stock / asset to absorb the size of
the position you are using. In addition, keep in mind that if you take a stance
that is too large for the market, you might encounter slippage on your entry
and stop-loss.

Learning Methods

Videos

We all
learn in separate ways. For instance, some will discover the most helpful
videos of day trading strategies. That’s why a number of brokers are now
offering a variety of day trading strategies in easy-to-follow training videos.
Take a look at their teaching and resources section to see what’s on offer.

Blogs

If you’re
searching for the best day trading strategy that works, sometimes internet
blogs are the place to go. Often free, you can learn strategies inside the day and
more from seasoned traders. On top of that, blogging is often a wonderful
source of inspiration.

Forums

Some
individuals learn best from the forums. This is because they allow you to make
comments and ask questions. Plus, you often discover day trading techniques
that make it simple for anyone to use. However, owing to restricted room, you
usually only get the basics of day trading strategies. So, if you’re searching
for more in-depth methods, you might want to consider an alternative learning
tool.

PDFs

If you
want a detailed list of the best day trading strategies, PDFs are often a great
place to go. Their first advantage is that they’re simple to follow. You can
open them as you attempt to follow the directions on your own candlestick
charts.

Another
advantage is how simple it is to locate them. For instance, you can discover a
day trading strategy by downloading price action patterns in PDF with a fast
google. They can be very particular, too. So, finding particular goods or Forex
PDFs is comparatively simple.

In
addition, you will discover that they are oriented towards traders of all
levels of knowledge. You can therefore discover PDFs and advanced PDFs for
beginners. You can even discover country-specific alternatives, such as day
trading tips and strategies for Indian PDFs.

Books

Having
said that, a PDF is simply not going to go into the stage of detail that many
books will have. Being simple to follow and comprehend also makes these perfect
for beginners. The following books provide comprehensive examples of intraday
approaches:

  • The Simple
    Strategy
     – A Powerful Day Trading Strategy for Trading Futures, Stocks,
    ETFs and Forex, Mark Hodge
  • How to
    Day Trade:
     A Detailed Guide to Day Trading Strategies,
    Risk Management, and Trader Psychology, Ross Cameron
  • Intra-Day Trading
    Strategies
    : Proven Steps to Trading Profits, Jeff Cooper
  • The
    Complete Guide to Day Trading:
     A Practical Manual from a
    Professional Day Trading Coach, Markus Heitkoetter
  • Stock
    Trading Wizard:
     Advanced Short-Term Trading Strategies, Tony Oz

Online courses

Other
individuals will discover the best way to learn interactive and organized
classes. Luckily, there are now a number of internet locations that offer such
services. You can discover classes on commodity trading day strategies, where
you can walk through a crude oil strategy. Alternatively, you can discover FTSE
trading day, gap, and hedge policies.

Trading for A Living

If you’re
looking to pack up your day’s work and begin trading for a living day, then you’ve
got a difficult but enjoyable journey ahead of you. You’re going to need to
wrap your head around sophisticated strategies, as well as efficient risk and
money management strategies. Discipline is crucial.

Final Word

Your
profits at the end of the day will rely heavily on the policies of your
employer. So, it’s worth keeping in mind that it’s often a simple approach that
proves to be effective.

Also, remember that
technical analysis should have a significant role to play in validating your
approach. Even if you choose early entry or end of day trading methods,
controlling your risk is vital if you still want to have money in your bank at
the end of the week. Finally, creating a strategy that works for you requires
practice, so be patient.