Best Day Trading Strategies
Day trading is when a trader places an opening and closing trade on the same stock on the same day. The number of transactions, in this case, does not matter: a day trader will remain one no matter how many transactions a trader makes as long as all of them are closed before the end of the trading day.
The purpose of day trading is to make a profit from frequent, small market fluctuations while minimizing the risk of loss. It provides excellent profit to individuals who have the necessary knowledge, skills, and experience. This type of trading is most suitable for many beginners and is often chosen by professional traders for its advantages.
Day Trading Strategies for Beginners
A strategy is one of those elements that you need to be very careful about when choosing it and diligent when mastering it. If you make the right choice for a certain market condition and test it before obtaining positive results, you can make very good money in the financial market. A distinguishing feature of strategies for day trading is closing a position at the end of a trading day.
Professionals have developed thousands of diverse methods that can be based on technical indicators, candlestick analysis, graph analysis, scalping strategies, and others. They also include automated programs, robots, and experts whose algorithms contain parameters for opening and closing positions. The most famous strategies:
- Pinocchio or Pin bar;
- Using candlestick patterns – “Hammer,” “Shooting Star,” “Bearish and Bullish Absorption,” “3 White Soldiers and 3 Black Crows” and others;
- Double Stochastic Strategy;
- Triple screen by Elder;
- At the intersection of moving averages and many more options.
Example: Three white soldiers or black crows
The basis of this strategy is a candlestick pattern consisting of 3 candles. There are two types of such patterns: for the upward market – three white soldiers and for the downward – three black crows. This strategy is very simple and, therefore, suitable for beginners.
If explained shortly, when you see three candles of the same color appear on the market one after another and the last one completely closes, this means that you need to open a transaction in the opposite direction, since a reversal of a market movement will happen.
Day trading tips
We would also like to share some day trading tips for beginners that will guide you as you start your new trading journey.
- Choose the right sector for day trading
Stocks from some sectors may be more interesting for day trading. Financial services companies provide excellent day trading opportunities. Another industry that may also interest day traders is social media. For example, LinkedIn and Facebook shares have large daily turnovers.
2. Do not place all your money into one transaction
Your first step in developing your strategy is to evaluate how much capital you can and are willing to risk in each transaction. Most successful traders risk less than one or two percent of their money in every trade transaction.
3. Define your entry point criteria
Decisions on when to buy shares should not be formed on the basis of intuition but based on a set of conditions that can bring you a positive result. A trader needs to develop his own criteria (entry rules) that will save him from impulsive and rash transactions.
4. Use price patterns for market entry and exit
Knowing the price point at which you want to enter the market and exit can save you from incorrect trading. Price patterns are considered one of the best trading tools. The repeating formations that you see day after day most often lead to a certain result on which you can earn.
5. Decide on your trading style
Depending on your style – scalping, daily pivot points, momentum strategy – the goals of the transaction may change. Experienced traders do not recommend mixing trading strategies since it is impossible to do several things equally well. Focus on a specific idea.
6. Use stop losses
When you trade with leverage, sharp changes in prices pose more risk to your capital than to the deposit of ordinary traders who do not use margin trading. Leverage helps to increase trading results, but their value will not always please you. Therefore, the use of stop-loss is a decisive factor in day trading.
7. Test your trading strategy
Once your strategy is defined, start testing it on historical data by manually going through past quotes, finding entry and exit points. This will allow you to understand whether the strategy will meet your expectations and bring you the desired profit. If yes, then go on to trading on a demo account in real-time, and if the strategy then makes a profit within two months, then you can try it with real capital.
Stock Trading for Beginners
Nowadays, anyone who decides to engage in trading, for example, day trading online, to make a profit can buy and sell instruments of their choice with the help of brokers. Experienced traders claim that trading stocks with the right approach can often bring more profit than Forex trading. Stocks trading is considered to be less risky, and this is important for any trader.
As with any trading, a certain knowledge base and of course capital are necessary. Stock trading for beginners and even experienced traders is not an easy task. If you are not prepared for trading, then the probability of financial losses is very high. Only with a serious approach to trading can one count on the fact that trading stocks online will bring financial success.
Everyone wants to make a ton of money, but few people understand that no matter what type of trading you choose, it is a very long and exhausting process. You need to be ready for continuous studying of the market, learning of day trading secrets, improving your strategies and professionalism. Individuals who made trading their careers share their tips with the beginners. Thus, we believe these stock trade tips should be valuable for any beginner stock trader:
- After learning the basics of trading type you chose, do not rush. Learn not to lose first. If you learn to minimize your losses, then your trading is off to a good start. However, remember never to overestimate your abilities. After all the errors are taken into account, and you worked out your strategy, only then you can safely set yourself for serious trading.
- You should start trade with real money only if you have extra money that you are willing to lose and “invest in your trading training.” Remember that this is trading, and it is not always successful, no matter what your experience level is. Losing the last or borrowed money is unacceptable from any point of view.
- At the initial stage, do not set yourself the task of achieving maximum profitability in trading. First, learn to understand how the overall market works, the logic of the market movement, find the necessary strategies and tools, so in the future transactions will bring you a stable income.