The S&P 500 continues to power through the current Coronavirus pandemic, having gained close to 5% over the last few months. Contrary to previous predictions, most of the overachievers in the market, including Facebook, Netflix, and Microsoft, continue to record double-digit growth.
This trend has increased optimism regarding the future of the securities market.
Do you have interests in the securities market? Day trading is among the most rewarding techniques in the securities market today. While this approach invites handsome returns, it can also be a risky undertaking. However, with these seven-day trading strategies, you could be smiling all the way to your bank soon.
Have you been looking for day trading tips to increase your chances of thriving in the securities market? You’re in luck. This article breaks down day trading for beginners in a straightforward but compressive approach.
What Is Day Trading?
Day trading refers to the approach to speculations in the securities market where the trader buys and sells the financial instruments within 24 hours. When dealing as a day trader, all your positions must close before the market closes each day. It’s essential for you to understand all the trends, news stories and always keep an eye on the markets to thrive as a day trader.
How do you ensure that you have the right tools for you to succeed as a day trader?
Day Trading Strategies
It would help to devise workable solutions that can help you navigate the risks involved in day trading. Here are some strategies you could consider if you’re keen on making it big as a day trader.
1. Momentum Trading
Momentum trading is one of the best strategies if you want to make it as a day trader. The approach allows you to jump on a stock whose price is moving up in real-time. However, this strategy requires an individual who can follow all the securities markets’ trends on the go.
You can take full advantage of momentum trading by keeping track of trends such as movement in prices. Other dynamics, such as surprise earnings and growth in a given industry, should also matter. Other factors that may drive your use of momentum strategy include instances where an acquisition or merger happens between major companies.
As a momentum day trader, you must also keep track of 30 to 40 percent stock movements. The internet today offers numerous options that can help you keep track of all the price changes. Swapfolio is among such leading portfolio and trading terminals.
2. Pullback Trading Strategy
If the momentum strategy doesn’t work for you, then you could consider the pullback trading strategy. The approach allows you to look for a stock that has an established trend in the securities market. You should then keep track of the stock to notice any price decline in the trend.
In case the trend in the stock is upward, then the downward price movement or pullback should be an entry point for you as a day trader. Day traders often utilize technical charts to help define stock trends. It would help to look for uptrends that utilize at least two successive high price movements.
When the stock moves in the opposite direction, it offers you a chance to capitalize on the stock and prepare for the eventual up-trend. The good thing about pullbacks in the market is that they present an opportunity to join the uptrend at an advantageous price. Even so, you might need to understand the various pullbacks and reverses in the market for you to thrive as a day trader.
3. Break Out Strategy
As a day trader, you need to keep looking for ways to survive the securities market’s ever-changing dynamics. The breakout strategy is among the unique approaches that can help you navigate the securities market’s complex nature. The breakdown strategies center on increased volumes when compared to prices.
As a breakout trader, all you need to do is enter into a long position every time the asset or security breaks above resistance. You may also consider entering into a short position each time the specific stock or asset breaks above resistance.
To operate as a breakout day trader, you might need to understand the relationship between volatility and pricing. You may also need to find the right instruments to trade. In most cases, the more frequent the stock prices hit the resistance levels, the more validated they will become.
Every day trader who uses the breakout strategy must always plan their entry and exit points. This is an important aspect to always consider as a day trader. You might feel the hit when volatility in pricing sets in during trading.
4. Scalping
Scalping is among the frequently used day trading strategies. Most day traders who specialize in forex consider this approach rather useful. The idea behind scalping is to capitalize on minute price changes.
The scalping method is not for the faint-hearted. It would help to understand that the driving force, in this case, is quantity. What this means is that you must look to sell as soon as the stock becomes profitable.
While scalping is fast-paced, it’s also rewarding. The idea is to ensure that you’re always on the lookout for high trading probability. This involves being on the lookout for all the low risk vs. reward ratios in the stock markets.
It would be best if you were on the lookout for the volatile instrument in the securities market. Further, ensure that you also keep up with attractive liquidity as a day trader. The other most crucial factor to consider is always to ensure that you remain hot on timing. When utilizing the scalping method, you can’t wait for the market.
The best way to deal with the markets is to always be hot on timing. This means that you need to close losing trades as soon as you can. The approach requires a trader who understands the dynamics in the markets and can convert speculations into actual returns.
5. Reversal Strategies
The reversal strategies are among the hotly contested day trading strategies in the securities market today. The argument is always that this approach is dangerous for beginners. Nonetheless, it remains one of the most common techniques for day traders. For most beginners, the reversal strategy might seem to defy every possible logic.
Are you wondering what day trading strategies exist in the market today? The reversal strategy is among the options you could consider. However, this option goes against the grain when it comes to market trading, which is often awkward.
You will often end up trading against the trends in the market, something that may seem odd. However, once you understand the dynamics around reversal strategies, you could be well on the way to success in the securities market. Most day, traders who succeed in their reversal strategies have adequate insights and experience regarding the market.
If you want to adopt reversal trading as part of your day trading, you might need to understand the low and high pullbacks and reversals in the securities market. Even as a beginner, it might be one of the best options once you understand the trends in the stocks and assets you intend to trade-in.
6. Using Pivot Points
Most beginners aren’t aware of how useful pivot points can be when pushing your luck in the securities market. The idea is to use pivot points as a useful tool in the forex trading context. Most range-bound traders consider this option as a useful resource in their trading process.
The best part about using pivot points as a strategy is that it also allows you to combine multiple other techniques in your quest to maximize on the stock markets. Most traders who use pivot points also consider breakout strategies as an option.
The fact that forex pivot points often indicate potential turning points means that they are reliable when used to predict the market trends. Pivots work as an essential indicator of when the market levels may change from bullish to bearish, which is an important lesson when learning the broad concept of market sentiments.
7. Avoid Penny Stocks
This is a bonus tip for any beginner looking to thrive as a day trader. If you aren’t careful, penny stocks could become your first undoing. Most penny stocks are illiquid, which may limit your chances of success as a day trader to hit the jackpot. One of the bonus day trading strategies you must carry forward is to always deal with liquid stock.
Unless you see a real chance and have all your facts right, it may be essential to avoid such illiquid stock. Penny stock can be an early death bed, even for the most astute traders.
It’s Time to up Your Day Trading Aptitude
Day trading can be a rewarding technique for any trader. However, it takes having adequate insights into the market for you to become an experienced day trader. Have you been looking for day trading insights to help you commence the journey towards success in the stock markets?
These seven-day trading pointers provide all the day trading for beginners information you need to help you break even as a day trader. Once you grasp these day trading strategies, you’ll be well on your way to become a successful day trader.
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