Day trading strategies can help you to succeed in day trading career. Generally, day trading indicates buying and selling of financial instruments in a trading day. Stock day trading is an act of buying and selling of stocks in intraday.
Day traders buy stock at downtrend reversal and sell stock at uptrend reversal point. They make profit when trades go to upward and make lose when trades go to down.
Clearly, day trading is an active trend reverse trading to win the trades. Follow these 20 strategies to win day trading. If you learn the below day trading strategies, you can flourish your trading career.
1. Developing day trading skill
First of all, you have to develop trading skill. Knowledge is power. You can learn by reading books and following blogs like Financial Ask.
You can start your journey by designing a list of topics. Then, you need to master on these topics.
You can divide your list into three parts–basic information about stock market, technical indicators and fundamental indicators.
In order to beat the market, you should always learn new strategies and try to implement these new strategies.
Moreover, you need to know about how to start share investing and the pre steps of stock investing.
2. Study the market
The more you study the market, the more you can learn about the companies and market behavior. Day traders try to understand the trend of a stock.
Hence, they are the top opportunist. To get the best opportunity, a day trader has to study the market each day. You should find out free time to study the market.
Many traders study the market after trading hours. As day traders have to select some stocks for next day, they like to study the market after closing the market.
3. Trade the rumors
Rumors are the best friend for day traders. But, a day trader needs to careful about rumors. If he fails to trade rumors, he has to count lose.
I read a story about trading rumors in a famous day trading book. The summary of the story is cited here.
This was a Canadian gold mining company. A rumor circulated that this company got a gold mine in South Africa.
After publishing this rumor, the company’s 15 dollars share raised to 300 dollars or more. Sorry to say, I can’t remember the exact figures.
But its stock price was 20 to 25 times higher than market value. Later, the company announced that they didn’t get any gold mine. Getting gold mine is a fake news.
What about the traders who bought this company’s stocks at 300 dollars or more? Within a few days, this company’s stock price reached at the beginning price. So, be careful about rumor.
You should not enter at the last moment. If you can, you should trade rumors at the beginning. Otherwise, you will get husk. Grain will be taken by early rumors traders.
4. Collecting News
Generally, a trader collects news at two times: before opening the market and after closing the market. He wants to find out the trending news.
News may be fake or real. That’s not a big deal. You should understand the trend of other traders. A news has two aspects: positive and negative.
5. Understanding trends- great day trading strategies
Trend is the golden opportunity for day trader. Intelligent traders have enough knowledge how to trade trend reversal.
A trend brings two opportunities: one is buying at the beginning of uptrend another is short sell at the outset of downtrend. You need to understand the actual movement of a trend.
6. Selecting Right Stock
Right stock at right time is the perfect batting for a big six. Mismatch a suitable ball can bold a striker. Similarly, a wrong stock can reward you a big loss.
Timing is another killer factor. Wrong timing means a diamond stock can bring a coal mine. So, try to match timing and right stock to win a trade.
7. Stick to Plan
Stick to plan is easy to say but difficult to do. Trading has both risk and reward. In many cases, traders fail to execute plan. They may have a plan for stop loss.
But can’t follow this rule because of situation. In each and every situation, you have to execute your plan.
Moreover, try to stick to the plan by any cost. Don’t let you plan swim in the sea when it needs to dry up in the sun.
8. Watch the minutes chart
Minutes chart provides information about the price reaction of a stock in every minute. This chart is very useful for day traders. They want to know each minute price movement to understand the trend.
Since you are going to become a prudential day trader, you need to find out the best platform for minutes chart. Watch the price movement and put buy or sale order.
9. Candlestick Chart
Candlestick chart is the best technical indicator for day trading and swing trading. You can get bear market or bull market candles to watch the price movement. This chart is easy to read and easy to apply.
It has two eyes catching colors. Green color candles indicate the bull market and red color candles indicate bear market for a stock. Take buy or sell decision by considering bear or bull candles.
10. Diversify Risk
Don’t Put all balance in a single stock. You shouldn’t risk more than 5% trading balance in a single stock. Try to trade 2 to 3 stocks at a time.
Suppose, your capital is 20000 dollars. You should put 15000 dollars in 3 companies and keep 5000 dollars for emergency fund.
If you make loss in 2 trades, you can cover your loss by third stock. Keep in mind that you must preserve your trading capital for future trade.
So, diversify risk by selecting more than one stock and buying more than one sector.
11. Control Greed and Emotion
They wait for better time without accepting small loss. At last, they have to lose more for this greed. On the other hand, there is no place for emotion in day trading. Utilize your brain instead of emotion.
12. Perfect Time to Entry
When you need to entry for a trade is a crucial point for day trading. Right timing varies from one exchange to another exchange. You need to find out entry point.
For example: my trading exchange has a suitable time for entry. At the last moment or middle of the trading hours, many stock’s prices start to fall. I wait for this time to put buy order.
I studied the market for a long time to find out the perfect buying time. You should study the market movement to get the perfect entry time.
13. Proper Time to Hold
First task is buying a right stock at right time. Then, they you should decide to hold or sell out. You should hold, when the share price is in uptrend. Never sell an uptrend stock until you confirm the downtrend.
You need to know how to trade trend reversal so that you can trade in both uptrend and downtrend market. But, sell out as soon as possible when price starts to down.
14. Right Time to Exit
I think every stock exchange has right time to exit like perfect time to entry. For example, I want to sell stocks at the beginning of trading hours. I have learnt from my stock exchange that first few hours have uptrend market.
Hence, I have divided the trading hours into three parts. First 2 hours are suitable for exit trade, middle 2 hours for waiting to take a decision and last 2 days for entry to buy.
Remember that day traders can sell stock within a moment and can buy stock within a few seconds. So, every minute brings equal chance of buying or selling.
If you trade like my trading exchange, you can short sell in last two hours and can buy back at the last moment. Apply buying or selling order considering perfect time. Be careful about short sell. Follow stock selling styles.
15. Take Profit
Try to take profit when you have a chance. Day trading is highly risky. As day traders are trend traders, they have equal chance of loss and profit.
So, if you have a chance to take profit, never late. Otherwise, your profit may turn into loss within a moment.
16. Follow Stop Loss Rule
In my writing, I said many times about the golden rule of stock trading: stop loss rule. Never hesitate to apply stop loss at the outset of downtrend.
Swing traders may wait for few weeks to reverse the downtrend. But day traders always like to close the trade in intrady. So, follow stop loss to correct your trading mistakes.
If you can safeguard your capital, you can earn money in future. Losing maximum capital means you are going to shut down trading career.
17. Cautious about Margin Loan
Margin loan is dangerous policy for traders. If you are a beginner, margin loan is more dangerous.
Margin loan has two serious problem. First problem: when share price starts to fall, your broker will force you to sell at loss. You have no choice to wait or convert day trading into swing trading.
Second problem: margin loan can kill all of your business capital if you make any serious mistake. Hence, it is better to trade with your own capital.
18. Don’t Short Sale
Don’t short sell until you have enough confident on your decision. Perhaps, your decision may wrong. You have to count loss.
Since you have to buy back the exact stock, you have to fall in puzzle when stock price reaches high. A short seller has to buy back at high price. Hence, think twice before sell short.
19. Stay Calm
Stay calm when you make profit. Even stay calm when you make lose. Appropriate thinking helps you to take good decision. A day trader takes decision in a few minutes. So, he needs to stay calm about any decision.
20. Wait for Next Opportunity
If you make mistakes after following above 19 strategies, you should wait for next opportunity. Market has unlimited opportunities.
Missing one chance doesn’t mean you have no chance to win. A successful day trader never wins all trades. They win more than losing amount. That means they are successful. So, wait for your happy moment.
10 Frequently Ask Questions about day trading
1. Why does day trading risky?
Day trading is highly risky because it is trend reverse trading. If a trade goes against, a trader had to count huge loss. Moreover, day traders close trade in intraday.
Hence, they have to follow stop loss rule to save capital. As one can’t 100% predict the trend, a day trader makes much loss when a trade goes down.
2. How much capital do I need for day trading?
Generally, day traders have large capital. As they want to earn enough in a single trade to cover 2 to 3 losing trades, they have big account. If you are a beginner, you can start as much capital as you want. You can start with 20000 dollars.
3. How much experience do I need to succeed in day trading?
You need huge knowledge and experience to succeed in day trading. Day trading game is for intelligent traders. They always gather experience and learn new strategies.
I think you need at least one year’s active involvement in day trading to gather sufficient experience.
4. Is day trading allowed to all countries?
Day trading doesn’t allow to all countries. You need to check your trading exchange before opening beneficiary ownership (BO) account.
Many countries don’t allow day trading in order to control the market. It has a lot of demerits. So, some countries restrict day trading.
5. What is the success rate in day trading?
Day trading success rate is comparatively small. No one can exactly say the success rate. But it may not be greater than 15 to 10 percent. You need to imagine within 10% to win day trading career.
6. Why should I become day trader?
Day trading is a serious business. If you master in on it, you can trade for living. You needn’t work for all day. You have enough time to roaming. Moreover, you can earn enough to become rich.
7. What is the best book on day trading?
A number of books you can get on day trading. “How to Day trade for a living” is a good book on day trading. You should read as many books as possible to gather knowledge.
8. What are the technical indicators for day trading?
9. Why do many day traders lose all trading capital?
Day trading success rate is lower than failure rate. If a trader doesn’t follow stop loss rule, he has to lose much money. Fear of losing small loss turns into huge loss.
So, a day trader may lose all business account, if he fails to take right decision at right time.
10. What is the best strategy for day trading?
To Sum Up
Firstly, you need to learn about day trading strategies. Secondly, you should apply these day trading strategies. Thirdly, you should correct mistakes if you fail any trading strategies. Finally, if you should wait for next chance. I hope these above mentioned 20 day trading strategies can help you. Happy day trading!