Everyone knows about the day trading or intraday trading. If anyone doesn’t know or want to understand day trading in detail, then this article is for all of them. In this article, you will read a detailed guide about intraday trading:
1. What is Intraday Trading or Day Trading?
2. How to Start Day Trading?
3. Top Day Trading Strategies
4. Best Day Trading Indicators
5. What is the Risk in Day Trading?
6. Tips of Day Trading for Beginners
What is Day Trading?
Day trading is a method that includes the practice of buying and selling assets on the same trading day. It is employed in every financial market, but it is mostly used in the forex market, stock market, crypto trading and indices trading.
The day traders take the benefits of the small price fluctuations. It occurs during the trading day. They open several trades and close within the day session. Notably, traders always look for high volatile assets.
A requisite for success in day trading is having adequate market knowledge.
Some Basic Points about Day Trading
1.There is not any formula for success as a forex Trader. Thorough market analysis and perfect trading plan are essential; even so, there is no success guaranteed.
2. When price moves, the risk increases sharply throughout the day.
3. While executing the day trading strategies, market practitioners avoid subjection to risks related to massive price movements or price gapping overnight- at a time when no can control the market or when the market is closed.
4. Commissions and charges of holding the positions overnight, which are known as swaps, are not connected to day trading.
5. Day trading usually involves executing hundreds of trades for a short period and book small profits. It brings liquidity in the market due to its trading volume.
How to Start Day Trading?
The first step to start intraday trading is to have a trading account with a suitable broker. Because to execute this technique correctly, advanced trading platforms, trading tools and charts are required as day trading involves hundreds and thousands of trades during the day time, so the execution of the trade should be fast.
With ETFinance, you can open the trading account and start your trading journey successfully. The broker is highly regulated and provides an advanced level of trading platforms and tools that are required for the day trading. It offers multiple tradable assets like currencies, stocks, commodities, cryptos, etc.
Day trading can be profitable, but it’s not simple to execute. Day trading also involves lots of risks, like any other trading methods. Therefore it requires a lot of understanding about the financial markets. Professional traders would exhibit the fact that a proper trading plan should include detailed risk management methods. Using this plan, professionals inspect the market for better trading opportunities.
Best Day Trading Strategies
1. Trend Strategy:
Trend trading is ideal and favourable for the novice traders. Searching for trading moments in the direction of the particular movement is easy and the most trusted pattern as markets trend in the same line with overriding moves 80% of the time. For executing this strategy, professionals always look for sharp movements which are trading with large volumes and following the trend direction.
Day Trading is always known as the quickest method to earn money in the financial market. Therefore it’s most used by the traders. The most important part of this strategy is it’s very complicated and needs a lot of time and concentration for monitoring of the markets. Day trading is profitable, but at the same time, it also comes with high risks and not recommended for every market practitioner.
2. Scalping Strategy:
Scalping is the most widely used day trading strategy. The forex traders mostly use it. In this method, market practitioners execute hundreds of small trades during the day. These trades can last even for seconds. Traders square of the positions with as soon the positions goes the profit. Professional traders mostly use it.
Traders always look for the most volatile assets. The main goal in this strategy is to book small profits from the small price fluctuations through the trading day. Traders can earn a fair amount of money by making small trades, but at the same time, they will have to pay more attention to the price fluctuations and risk management as they can attract colossal loss if they don’t close the position at the right time.
3. Breakout Strategy:
This strategy involves the practice of opening the position after the price movement breaks a certain level. Traders open the short position if the price goes below the support level while they open a long position if the price level goes above the resistance level.
Once the assets move beyond the specific price level, the volatility increases and price will move in the direction of the breakout. Traders need to identify the correct entry and exit point. Traders always use the last performance of the asset to identify the breakout point.
4. Best Day Trading Indicators:
There are several day trading indicators which can be used while executing intraday trading. Every trading strategy has different indicators. The combination of various tools and methods can improve the reliability of day trading. Some of the famous and crucial indicators which are used by the market practitioners are:
A).The MACD Indicator
B).The Fibonacci Indicator
Risks Involved in Day Trading
Naturally, the compact the time frame chosen for trading, the bigger the risk. Hence the day trading is considered as the riskier trading method. Price movement will be higher in a short period. Therefore intraday players use the high-risk methods to maximise their profits.
It’s important to remember that both risk and opportunity comes combined. All-day trading strategies come with high risks, therefore if they give more profits then also there can be a considerable loss. Hence, to avoid such loss market players should plan the trading methods correctly and needs through market research and practice.
Some of the common risks are:
1. Trading with high leverage to earn maximum profits in relatively less time with high price movement
2. Opening hundreds of trades to make small profits and reaching their day ending profit goals.
Tips of Day Trading for Beginners
The first and most important tip for mastering the day trading is to start with the demo account. So that they earn knowledge and become familiar with the dynamic of the financial markets, trading methods and functionality of the trading platforms.
The second tip is that traders can lose their capital; therefore, they should invest money wisely and only that they can afford to lose. Sometimes due to high leverage, beginners might invest the maximum amount which they can’t afford.
The third and most important tip is to choose a correct broker as day trading technique involves the practice of executing hundreds of trades that can attract a huge amount of commission and spreads. This can affect the potential profits at the end of the day. Different brokers have different charges; therefore, opening the trading account with a suitable broker is essential. As mentioned above, you can open your account with ETFinance as it offers relatively low commission and spreads compared to other brokers in the industry.
Final Thought :
Day trading is the best trading method for making profits if it’s executed correctly. Therefore it’s better to have the proper trading plans and understanding of the market. Technical analysis is crucial in employing day trading strategies to identify the entry and exit timing of the position. For understanding other trading methods, you can go through our other articles in the blog section.