Day trading is the act of buying and selling financial instruments on the same day. As such, the trader does not hold a long or short position overnight. It involves taking advantage of small price movements in the course of the day and making a profit out of it. With knowledge, experience, and discipline, it can be a lucrative venture.
However, it is dangerous to those who are not willing to invest in research and be patient enough to understand the strategies. Therefore, you need to enroll in a day trading course if you want to know everything about day trading. If you are looking to gain the benefits of day trading, here are the day trading strategies you need to know and understand.
Fading
This strategy involves shorting of the stocks right after an upward movement. The day trader’s price target is when buyers start to buy again, meaning that a day trader using this strategy aims to benefit from market moves trying to restore the stock’s past price.
Scalping
Scalping is based on the belief that several small wins can add up to a substantial amount of money at the end of the day. Under the scalping strategy, the trader sets a buy and sell target and sticks to the targets. As such, a scalper needs to be fast as they can at times, buy and sell within seconds.
It is an effective strategy for confident day traders who are quick decision makers with no regrets about their decisions whatsoever. If you are not focused and are a poor decision maker, this strategy is not good for you.
Breakout
Under this strategy, the trader focuses on where a price moves above the last top resistant price. One needs to do more than looking at the chart and identifying the resistance price. Before making a buy or sell decision, a day trader needs to monitor the volume of the trading stock. This is because in most cases, high trading volumes are less sustainable at the new higher price compared to low trading volumes.
Daily Pivots
As the name suggests, day traders using this strategy make profits from a financial instrument’s daily volatility. The trader targets to buy a stock at it’s very least price of the day and sell it at its highest of the day. The target price is when the day trader sees a sign of price reversal.
Momentum Trading
Under this strategy, the trader looks for strong upward price movements caused by market catalysts such as acquisitions, mergers, earnings growth, etc. This strategy targets its price at the point where the trade volumes start to decrease. Basically, one makes the purchase before or right after huge news is announced and sells right before the market has stopped moving in a particular direction.
If you are looking to become a day trader, investing your time in understanding these strategies will set you on the right path. As a day trader, you do not have to master all these strategies. Know which one works for you and start trading to gain experience, and it might be helpful to gain a mentor succeed quickly.
