Strategies

Day trading strategies are essential if you want to profit from frequent, small price movements. A consistent, effective strategy relies on in-depth technical analysis, using charts, indicators and patterns to predict future price movements. This page gives you a thorough breakdown of trading strategies for beginners, working up to advanced, automated and even asset specific strategies.

 

 

It will also outline some regional differences you should be aware of and point you in the direction of useful resources. Ultimately, you need to find a day trading strategy that suits your specific trading style and requirements.

Also, make sure your choice of broker fits strategy based day trading. You will want things like;

• Excellent trade execution speed,
• Price action data (+ level 2 if possible)
• Ability to trade directly from charts,
• Trade automation,
• Stop losses and take profit orders
• Etc etc

Trading Strategies for Beginners

Before you get stuck in a complicated world of highly technical indicators, focus on the basics of a simple day trading strategy. Many people make the mistake of thinking that you need a very complicated strategy to succeed intraday, but the more simple, the more effective it is.

The basic

Incorporate the valuable elements below into your strategy.

• Money Management – Before you start, sit down and decide how much you’re willing to risk. Remember that most successful traders will not place more than 2% of their capital per trade. You have to prepare yourself for losses if you want to be there when the wins start rolling in.
• Time Management – Don’t expect to make a fortune if you only allocate an hour or two a day to trading. You must constantly monitor the markets and be on the lookout for trading opportunities.
• Start small – stick to a maximum of three stocks during a day. It’s better to get some stuff than to be average and make no money.
• Education – understanding the intricacies of the market is not enough, you also need to stay informed. Be sure to stay on top of market news and any events that will affect your asset, such as a change in economic policy. You can find a wealth of online financial and business resources that will inform you.
• Consistency – it’s harder than keeping emotions in check when you’ve had five coffees and you’ve been staring at the screen for hours. You must let math, logic and your strategy guide you, not nerves, fear or greed.
• Timing – the market will become volatile as it opens each day, and while experienced day traders can read the patterns and profit, you need to take your time. So keep quiet for the first 15 minutes, you still have hours to go.
• Demo Account – A must tool for every beginner, but also the best place to test or experiment with new or refined strategies for advanced traders. Many demo accounts are unlimited, so they are not time limited.

Components Every Strategy Needs

Whether you are looking for automated day trading strategies, or for beginners and advanced tactics, you need to consider three essential components; volatility, liquidity and volume. If you want to make money on small price movements, choosing the right stock is extremely important. These three elements will help you make the decision.

• Liquidity – it allows you to quickly enter trades at an attractive and stable price. Liquid commodity strategies, for example, will focus on gold, crude oil and natural gas.
• Volatility – This tells you potential profit range. The greater the volatility, the greater the profit or loss you can make. The cryptocurrency market is one such example which is known for high volatility.
• Volume – This measurement 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 tells that there is a significant interest in the asset or security. An increase in volume is often an indication that a price jump either up or down is fast approaching.

 

 

5 day trading strategies

1. Breakout

Breakout strategies center around when the price clears a specific level on your chart, with increased volume. The trader enters a long position after the asset or security breaks above resistance. Alternatively, enter a short position as soon as the stock breaks below the support.

After an asset or security trades past the specified price barrier, volatility usually increases and prices will often trend in the direction of the breakout.

You need to find the right tool to trade. When doing this, you need to consider the support and resistance of the asset. The more often the price hits these points, the more validated and important it becomes.

 

 

Entry points

This part is nice and simple. Prices set at the closing and higher resistance levels require a strong position. Prices that are set to close and below a support level are needed is a positive position.

Plan your exits

Use the asset’s recent performance to determine a reasonable price target. Using chart patterns will make this process even more accurate. You can calculate the average recent price movements to create a target. If the average price swing during the past few price swings was 3 points, that would be a sensible target. Once you reach the goal, you can exit the trade and enjoy the profit.

2. Scalping

Een van die gewildste strategieë is scalping. Dit is veral gewild in die forexmark, en dit lyk goed om voordeel te trek uit klein prysveranderings. Die dryfkrag is hoeveelheid. U sal moet verkoop sodra die handel winsgewend word. Dit is ‘n vinnige en opwindende manier om te verhandel, maar dit kan riskant wees. U het ‘n hoë waarskynlikheid vir handel om die lae-risiko-vergelyking-verhouding te verminder.

Wees op die uitkyk vir wisselvallige instrumente, aantreklike likiditeit en wees op die regte tydstip. U kan nie wag vir die mark nie, u moet so gou as moontlik ambagte verloor.

3. Momentum

Popular among trading strategies for beginners, this strategy deals with acting on news sources and identifying important trends with the support of high volume. There is always at least one stock that moves about 20-30% every day, so there is ample opportunity. You simply hold your position until you see signs of reversal and then exit.

Alternatively, you can fade the price cut. This way, your price target is once the volume starts to decrease.

This strategy is simple and effective if used correctly. However, you should ensure that you are aware of the news and earnings announcements. Just a few seconds on each trade makes all the difference to your profits at the end of the day.

4. Setback

Although highly debated and potentially dangerous when used by beginners, reverse trading is used all over the world. It is also known as trend trading, retracement trending and a mean reversion strategy.

This strategy defies basic logic as you aim to trade against the trend. You need to be able to accurately identify potential withdrawals and also predict their strength. To do this effectively, you need in-depth market knowledge and experience.

The ‘daily pivot’ strategy is considered a unique case of reverse trading as it concentrates on buying and selling the daily low and high of the pullback/bounce.

5. The use of pivot points

A pivot point strategy for day trading can be fantastic for identifying and taking action on critical support and/or resistance levels. This is especially useful in the forex market. Additionally, it can be used by bullish traders to identify entry points, while trend and breakout traders can use pivot points to locate key levels that need to break in order to move as a momentum.

 

 

Calculation of pivot points

A turning point is defined as a turning point. You use the high and low prices of the previous day, plus the closing price of a security to calculate the pivot point.

Note that if you calculate a pivot point using price information from a relatively short time frame, the accuracy is often reduced.

How do you calculate a pivot point?

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

You can then calculate the support and resistance levels using the pivot point. To do this, you must 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 resistor (R2) = P + (R1-S1)
• Second support (S2) = P – (R1- S1)

Application

For example, if applied to the FX market, you will find that the trading range for the session takes place between the pivot point and the first support and resistance level. This is because a large number of traders play this series.

It is also worth noting that this is one of the systems and methods that can also be applied to indexes. For example, it can help to create an effective S & Form P day trading strategy.

Limit your losses

This is especially important if you use margin. Requirements are usually high for day traders. When you trade on margin, you are increasingly vulnerable to sharp price movements. Yes, this means the potential for greater profit, but it also means the possibility of significant losses. Fortunately, you can use stop losses.

The stop loss controls your risk for you. In a short position you can place a stop loss above a recent high, for long positions you can place it below a recent low. You can also make it dependent on volatility.

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

One popular strategy is to set up two stop losses. First, you place a physical stop-loss order at a specific price level. This is the biggest capital you can afford to lose. Second, you create a mental stop-loss. Place it at the point where your access criteria are violated. So if the trade takes an unexpected turn, you will exit quickly.

Forex Trading Strategies

Forex strategies are inherently risky because you need to accumulate your profits within a short period of time. You can apply any of the strategies above to the forex market, or you can see our forex page for detailed strategy examples.

Cryptocurrency Trading Strategies

The exciting and unpredictable cryptocurrency market offers many opportunities for the connected day trader. You don’t need to understand the complex technical makeup of bitcoin or ethereum, nor do you need to have a long-term view of their viability. Simply use strategies to profit from this volatile market.

Visit cryptocurrency page for cryptocurrency specific strategies.

Stock Trading Strategies

Day trading strategies for stocks rely on many of the same principles outlined on this page, and you can find many of the strategies described above. Below is a specific strategy you can apply to the stock market.

Moving Average Transition

You need three moving average rules:

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

This is one of the moving average strategies that generates a buy signal when the fast moving average crosses above and above the slow moving average. A sell signal is generated simply when the fast moving average crosses below the slow moving average.

So, you will open a position when the moving average line crosses in one direction, and you will close the position when it crosses the opposite way.

How can you determine that there is definitely a trend? You know the trend is continuing if the price bar stays above or below the 100-period line.

For more information on stock strategies, see our Stocks and Equities page.

Spread betting strategies

Spread betting allows you to speculate on a large number of global markets without ever owning the asset. Moreover, strategies are relatively simple.

If you want to see some of the best day trading strategies, see our spread betting page.

CFD strategies

Developing an effective day trading strategy can be complicated. Opt for a tool like a CFD, however, and your job can be somewhat easier.

CFDs are concerned with the difference between where a trade is entered and exited. In recent years, their popularity has increased. This is because you can profit when the underlying asset moves relative to the position taken, without ever having to own the underlying asset.

Consult our CFD page for specific CFD specific tips and strategies for day trading.

Regional differences

Different markets have different opportunities and barriers to overcome. Day trading strategies for the Indian market may not be as effective when applied in Australia. For example, some countries may not trust the news, so the market may not react the same way you would expect them to at home.

Regulations are another factor to consider. Indian strategies can be customized to conform to specific rules, such as high minimum balances in margin accounts. So, get online and see if obscure regulations don’t affect your strategy before you put your hard-earned money on the line.

You may also find that different countries have different loopholes to jump through. If you are in the West but want to apply your usual day trading strategies in the Philippines, you need to do your homework first.

What type of tax will you have to pay? Will you have to pay it abroad and/or domestically? Differences in marginal tax can have a significant impact on your profits at the end of the day.

 

 

Risk management

Stop loss

Strategies that work take risk into account. If you don’t manage any risk, you’ll lose more than you can afford and be out of the game before you know it. Therefore, you should always use a stop loss.

The price may appear to be moving in the direction you were hoping for, but it can reverse at any time. A stop-loss will control the risk. You will exit the trade and suffer only a minimal loss if the asset or security did not come through.

Smart traders usually don’t risk more than 1% of their account balance on a single trade. So if you have £27,500 in your account, you can risk up to £275 per trade.

Position size

It will also enable you to choose the perfect position. Position size is the number of shares taken on a single trade. Take the difference between your entry and stop-loss prices. For example, if your entry point is £12 and your stop loss is £11.80, then your risk is £0.20 per share.

Now divide £275 by £0.20 to find out how many trades you can take on one single trade. You can take a position size of up to 1,375 shares. This is the maximum position you can take to stick to your 1% risk.

Also check if there is sufficient volume in the stock/asset to absorb the size of your position. Additionally, remember that if you take a position that is too large for the market, you may enter a slump and stop loss.

Learning methods

Videos

Everyone learns in different ways. For example, some will find videos of day trading strategies useful. That’s why a number of brokers now offer numerous types of day trading strategies in easy-to-follow training videos. Check out their learning and resources section to see what’s on offer.

Blogs

If you are looking for the best day trading strategies that work, then these are the online blogs to go to. Often free, you can learn intraday strategies and more from experienced traders. In addition, blogs are often a great source of inspiration.

Forums

Some people learn best from forums. This is because you can comment and ask questions. In addition, you will often find day trading methods so easy that anyone can use them. However, due to the limited space, you usually only get the basics of day trading strategies. So, if you’re looking for more in-depth techniques, 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 fantastic place to visit. The first advantage is that it is easy to follow. You can open it while trying to follow the directions on your own candlestick charts.

Another advantage is how easy it is to find. For example, you can find a day trading strategy using price action patterns PDF download with a quick Google. It can also be very specific. So, finding specific commodity or forex PDFs is relatively simple.

In addition, you will find that they are geared towards traders of all experience levels. So you can find beginner PDFs and advanced PDFs. You can even find country specific options like day trading tips and strategies for PDFs in India.

Books

That being said, a PDF simply won’t be in the level of detail that many books are. The books below provide detailed examples of intraday strategies. Easy to follow and understand also makes it ideal for beginners.

• 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
• Intraday Trading Strategies: Proven Steps for Trading Profits, Jeff Cooper
• The Complete Guide to Day Trading: A Practical Manual from Professional Day Trader Markus Heitkoetter
• Stock Wizard: Advanced Short-Term Trading Strategies, Tony Oz

So, day trading strategy books and ebooks can seriously improve your trading performance. Check out our books page for more reading.

Online courses

Other people find interactive and structured courses the best way to learn. Fortunately, there are now a variety of places online that offer such services. You can find courses on commodity day trading strategies that walk you through a crude oil strategy. Alternatively, you can find FTSE, gap and hedging strategies for day trading.

Trade for a living

If you are looking for the day job and day trading, you may have a challenging but exciting journey ahead of you. You need to wrap your head around advanced strategies as well as effective risk and money management strategies. Discipline and a thorough understanding of your emotions are essential.

Visit our live trade page for more information.

Final Word

Your profit on the day will depend a lot on the strategies you employ. So it’s worth bearing in mind that it’s often the simple strategy that turns out to be successful, regardless of whether you’re interested in gold or the NSE.

Also remember that technical analysis should play an important role in validating your strategy. Additionally, even if you opt for early entry strategies until the end of the day, controlling your risk is essential if you want to still have cash in the bank at the end of the week. Finally, developing a strategy that works for you takes practice, so be patient.