Day Trading Strategy – Conquer The Share Market 2021

Day Trading Strategy

Table of Contents

The financial markets are vast, with various markets operating in them, and to invest in such markets, traders need knowledge and skills to be successful. A trader has to research the market and analyse it well to set strategies and plans. The markets are volatile and require a good understanding before going live. So, to ease the process, traders study the trends and situations based on which strategies are used. 

One such popular method is day trading strategy, involving buying and selling financial instruments to optimise profits in a day. The day trade even takes place multiple times or a few in a day. Thus, traders take advantage of the market fluctuations quickly and smartly. In the share market, day trading works well as traders invest in company shares and sell them the same day at a high price to earn.

Thus, day trading is a valuable trade strategy maximising the profits and enhancing the trade. The article introduces day trading and its components for understanding the use of strategy. 

Day Trading

Day trading involves buying and selling assets to make money which requires deep market understanding to take advantage of market events. The trade has high volume trades and requires appropriate decision-making skills. A trader cannot blindly go and use the day trade strategy. With the market trade experience and polished skills, traders can use day trading. 

Traders of day trading strategy avoid the risks and negative gap between the closing price and opening price of the next day. To manage this, traders need to be quick scanners of the market to handle the adversities of the trade. 

However, most day traders are speculators who do not buy the instrument but speculate on the price of the security to earn. 

Day trading is a short term trading style that makes small earnings but a huge profit for the trader. Contrasting with the long term trade, the strategy is where the trading instrument is not held for a time period and waits for the correct market opportunity. 

The day trading strategy is flexible and could be used for any market trading, but traders of stock and forex markets mostly use it. Such traders are good at their work and have huge funds available to invest in the market. Using short term strategies and high leverage to open up with high positions. Traders take advantage of the potential small price fluctuations from liquid shares and currencies. 

Day trading includes various strategies that help traders take benefit of small movements in the market. Traders have to be alert to enjoy profit from such trades focusing not only on price changes but also on fundamental factors of trade. 

How do day trading strategies work?

Day trading strategies are several and suit different conditions that a trader should be able to analyse. To make the strategy work, traders can use brokers that provide trading tools and platforms to analyse the market and take the next move. There are many brokers in the market that assist traders in investing and using the trading platforms to analyse the market and set strategies. 

TradeATF is a unique broker with the best trading services that would enhance the trade and lead to successful investments. Traders can use any day trading strategy with TradeATF to invest in shares of the market and take advantage of the opportunities. It has scalping, news trading, range trading and other day trading strategies that profit from short term movements. 

How does day trading work? Is a question most novice traders and even other traders have in mind. We can understand the use of day trading in financial markets; for example, suppose an investor purchases 200 shares in the stock market at $10 per share at the market’s opening. In an hour, the price of a share shows an increase; thus, the trader finds the potential opportunity to earn. He decides to sell the stocks in the market at $12 per share. 

By selling the shares at a high price, the trader would make a profit of $400 {12-10 x 200}. 

That’s how the day trading strategy works in the market, but the traders have to be quick as the price fluctuates frequently and could make a loss if not traded adequately. 

Day Trading Strategies

Day trading strategy has been used for years now in the financial markets. In the share market, the strategy is used to have quick opportunities and earn small profits. However, the traders use various day trading strategies that enhance the trade with an effective outcome. The topic of day trading strategies discusses the kind of day trading strategies that are impactful in the trade market. 

So, let’s get into the features of the strategies and know about their use in the market. 

Breakout 

Breakout is a situation in the financial markets when the price of a security shifts above the resistance or below the support levels. It is used as an indicator of potential trend starters. The price starts trending towards the breakout direction, and that’s when traders can predict their next market move. 

In day trading’s breakout strategy, the main focus is on the price when the price clears the specified level with increased volume in the market, then breakout centres. The trader enters the long term trade position once the share breaks the resistance level and moves above it. Whereas, in the opposite situation, when the share breaks support level and moves below it, the trader goes for a short term trade position. 

A breakout situation usually occurs when the shares trade beyond the price barrier with increased volatility and price moving in the breakout direction. 

Traders of the day trading strategy have to be updated on the support and resistance levels to use breakout strategy. This is because the trade decision depends on the price movements in relation to support and resistance. 

With the use breakout and the support and resistance levels, traders can even decide their entry points. If the price is close and above the resistance, then traders should go for bearish positions, and if the price is close and below the support level, traders should go for a bullish position. 

Traders can plan their exits from the market similarly based on the movements of the price. Thus, the breakout is a useful trade strategy that incorporates so many benefits for traders. 

Scalping

Scalping is a popular day trade strategy, where traders sell the shares immediately for the purchase of other shares for profits. Thus, taking advantage of the minute movements of the shares. The strategy is fast and therefore is a bit risky. Traders have to be careful with using the strategy and be sure of their decisions. 

The main driving force of the scalping strategy is quantity. Traders look for opportunities and sell the shares to have profits. The scalpers keep their positions for seconds or minutes and have multiple trade positions in a day. The traders prefer trading in small volumes and invest in liquid markets for profits. 

Momentum 

Momentum trading strategy relates to the news sources and market updates that impact the trade. Traders identify the strong trending moves of the market and trade in high volume. There is ample opportunity for a trader in momentum trading as there’s always a stock that keeps moving. 

In momentum trading, the traders are supposed to hold their position until they find a reversal sign and decide to exit the market. For adequate decisions on trade, investors should be updated on news and earnings of the instrument in the market to have a profitable trade. 

The strategy could be effective if traders know its use correctly; otherwise, they may face loss. 

Reversal 

Reversal trading strategy is for professional traders who have market experience as use of the strategy by beginners is difficult. It requires extensive market knowledge to apply in the financial sector. The traders of the reversal market invest against the market trend with exact anticipation of pullbacks and prediction of the market strength. 

It is basically a reversion strategy that requires good market knowledge and analysis to identify the reversal and make benefit from it. 

Pivot Point

Pivot point strategy identifies the support and resistance level of the market and makes use of the short term opportunity. It takes advantage of the previous high, low and close of the market trading session. The pivot point has no secret strategy, but they use the reversion to the mean attitude in their trade. 

Traders, when far away from the pivot point, have more likely chances to witness a reversal in the trade. 

It provides traders with opportunities to benefit from the shares’ volatility and buy low and sell high for the day. 

Gap Trading

It is another significant short term trading strategy that traders use in financial markets. As stock markets gap quite often, traders use this strategy to benefit from the gaps. Traders use charts to analyse the movements of the share price; for example, say a fifteen minutes chart and check the trading range. 

It simplest buys and shorts the stocks; stocks that have gaps from the previous trade are focused and traded. It usually focuses on the movement of the shares for an hour, and if it rises, then it’s a range single of buying, and if it decreases, then it signals a short. 

Traders have to be alert not to miss the opportunities. 

What makes Day Trading Strategy difficult?

Day trading strategy is not simple and easy to use as it requires fast decisions and actions. The traders with the knowledge of the market and good trade experience are only able to exceed in such trade. Day trading is difficult due to various factors: 

The first and foremost factor is trading against the professionals. Such traders have the best technology and software to enhance their trade and earn in the end. 

Secondly, whatever profit traders earn from the market, they always have to pay tax, so on the small day trading, profits traders pay tax which is not worth it. 

Lastly, the trade is uncertain, and the individual day traders somehow involve their emotions in the trade, which could be difficult in the trade. 

Principles of Day Trading Strategy

Day trading strategy works on certain principles that traders need to follow to use appropriately in the financial markets. Here we have listed the day trading principles that are required for using the strategy: 

Knowledge

Day trading strategy is not possible without the knowledge of market trade. Traders have to be updated in addition to the basic trade knowledge. If they have all the required information that impacts the stock market, they will be able to make accurate decisions. So, a day trading strategy requires full homework before its execution. 

Funds

A day trading strategy cannot work without funds; a trader has to keep aside funds for using a day trading strategy. This is because it needs funds on a daily basis to invest in the markets. Mostly, day traders risk their 1 to 2 percent of funds to trade in the market. 

Time

Time is the key factor of day trading; traders have to be quick and also need to give time for the trade. It requires traders to analyse the market well before the trade begins and have adequate information to predict the change quickly. 

Small Investments

The day traders should always begin with a small investment at the start. This would give them time to understand the strategy and also avoid losing much capital. So at the start, traders should focus on investing in one or two shares of the market and gradually increase their investments in day trading with time. 

Conclusion

Day trading strategy is a significant part of share trading; it requires traders to have proper knowledge and experience before they invest their capital. A quick and short trading strategy that makes traders earn in a day, even multiple earnings. Thus, a viable way to earn profits from the share market. 

The traders of the strategy play a vital role in the financial market trading. Professional traders should take full advantage of the strategy to maximise their profits and be the earners of the trade. However, it is not a feasible choice for beginners of the trade due to the lack of knowledge and experience.

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