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Day Trading Strategy – Conquer The Share Market 2022

Day Trading Strategy
Table of Contents

Introduction:

The financial markets are vast, with access to 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 as it demand a good understanding and discipline before going live. This can help winning trades. Sadly, most beginning day traders will lose money. So, to ease the process, successful traders study the market trends, watch out the stock trends, and situations based on which strategies are used. 

One such popular method is day trading strategy, involving buy or sell financial instruments to optimise profits in a day. The day trade even takes place multiple times or a few in a day.

It is completely different from swing trading and become increasingly popular in recent years. There’s a huge difference between them. 

Thus, traders take advantage of the market fluctuations quickly and smartly. In the share market, day trading works well as traders invest in companies’ shares and sell them the same day at a high price to earn.

To become successful day trader, first step is to ask yourself how much capital you need and how much you’re expected to trade? Day trading is a valuable trade strategy maximising the profits and enhancing the trade.

However, there are some intraday trading rules you should stick to. So, you should use this strategy in demo accounts. The article introduces how to start day trading and its components for understanding the use of strategy. Here’s a complete overview of Day trading, so read this article till the end: 

Day Trading

Day trading involves buy and sell of regular or penny stocks or other asset on stock exchange to make money which requires deep market understanding to take advantage of market events.

There are many reasons to choose this strategy. Using this, Traders pick stocks on basis of prior performance of that certain stock as it can influence their decisions. 

The trade has high volume trades and requires appropriate investment decisions making skills in most cases. A trader cannot blindly go and use the day trade strategy. With the pre market trade experience and polished skills, traders can use day trading. 

Traders of day trading strategy avoid the high risk and negative gap between the closing price and market open 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, many day traders are not buyers or sellers, they are just speculators who do not buy the instrument but speculate on such stock prices to earn. 

Of course, 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 held for a good 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.

Traders implement short term strategies and high leverage to open positions. Traders take advantage of the potential small price fluctuations from liquid shares and currencies. 

Generally, day trading includes various strategies that help traders take benefit of small movements in the market to achieve their financial goals. Traders have to be alert to enjoy profiting from such trades focusing not only on value changes but also on fundamental factors of trade. 

How do day trading strategies work?

Day trading strategy suit different conditions that a trader should be able to analyse. To make the strategy work, traders can use stock brokers that provide trading tools such as technical analysis and platform to analyse the market and take the next move.

There are many brokerage firm in the market that assist traders in invest money and using the trading platform to analyse the market and set strategies. They may charge fees for using their trading platform. 

TradeATF is a unique and most recommended broker with the best trading services that would enhance clients’ trading experience and lead to successful investments. Traders can use any strategy with TradeATF to invest in shares of the market and take advantage of the opportunities.

It has scalping, latest stock market news updates, range trading and other intraday 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 tips 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 stock price shows a rise; thus, the trader finds the potential opportunity to earn. He decides to sell the stocks in the securities 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 stock prices rise 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 making profits.

However, the traders use various day trading strategies that enhance the trade with an effective outcome. The topic of day trading strategy 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 technical analysis or technical indicators of potential trend starters.

The price trend continues towards the breakout trending direction, and that’s when traders can predict their next market move. 

In this day trading strategy, the main focus is on the price when the price clears the specified level with increased trading volume in the market, then breakout centres.

The trader enters the long term trade position once the share breaks the resistance level and stock moves above it. Whereas, in the opposite situation, when the share breaks support level and moves below it, the trader goes for a short position. 

Of course, a breakout situation usually occurs when the shares trade beyond the price barrier with increased price volatility and price moving in the right direction and right time. 

Traders have to be updated on the support and resistance levels to use breakout strategy. This is because the trading 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 point. 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 strategy is a popular and commonly used day trading strategy, where traders sell shares immediately for the purchase of other shares for higher profits. Thus, taking advantage of the minute movements of the shares.

The strategy is fast and therefore involves high risk. Traders have to be careful with using the strategy and be sure of their quick 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 future profits. 

Momentum 

Momentum 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 momentum stocks that keeps moving. 

From candlestick charts to candlestick patterns and momentum strategies, day traders have a language all their own.

In moment 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 business news alerts, events and earnings of the instrument in the market to have a profitable trade. 

Suppose, if bad news is out, you might short the stock during the day by borrowing shares of the stock from the investment firm and then selling those borrowed shares.

The strategy could be effective if traders know its use correctly; otherwise, they may face loss. To protect from oversize losses, Warrior Trading sets a  limit loss/Stop loss order just below the entry price decline.

Reversal 

Reversal 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 downward or upward 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 day 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 stocks, that are falling steadily in lower price and sell higher price for the day. 

Gap Trading

It is another significant short term 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 the prices rise, then it’s a range single of buying, and if it decreases, then it signals a short sell. 

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. The intraday trading is difficult due to various factors: 

The first and foremost factor is trading against the professionals. Such traders have the best technology, technique and software to enhance their trade and earn a profit 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 trader 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 successful intraday trading principles that are required for using the strategy: 

Knowledge

You can’t succeed without the knowledge of market trade. Traders have to be updated in addition to the basics of trade knowledge. If they have all the required information that impacts the stock market, they will be able to make accurate decisions.

So, a strategy requires full homework before its execution. There are many brokerage firm in the market that assist traders in invest money and using the trading platform to analyse the market and set strategies. 

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, experienced day trader risk their 1 to 2 percentage of funds to trade in the market and earn more profits at the end of the day. Most traders opt for risk management strategies.

Time

Time is the key factor of intraday trading; experienced 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 trader 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 strategy with time. If you afraid of day trading strategy, you can invest in mutual fund.

Conclusion

As mentioned above, 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 strategy that makes traders earn in a day, even multiple earnings. Thus, a viable way to achieve profit target from the share market. 

The traders of the strategy play a important and essential role in the financial market trading. Professional intraday trader should take full advantage of the strategy to maximise their gains 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. In addition, check your Securities /MF/ Bonds in the consolidated accounts statement issued by NSDL/CDSL every month.

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