Best Day Trading Strategy
Day trading refers to the buying and selling of stocks throughout the day with an aim that the stocks that have been purchased will either climb in value or drop over the short period of time.
Day traders are also known as investors who hope for higher profits from the stock or forex market at a risk of a loss.
The day traders always have a belief that through day trading strategies they can possibly get profits in the long-term. A good trader must have strategies that will lead him or her to trade well during the day. The following are some the strategies that can be used in case you are thinking of buying and selling stocks within a day.
- Momentum Trading
Momentum trading is a situation where a trader or investor decides to buy a stock whose price is moving up. There are a few things that an investor should look out for especially in the stock market trade when using momentum trading: –
- The investor should look at the stock movement especially if it moves from 30-40%
- Latest trends for momentum trading through tools like StockWits.
- The investor should also look at smaller stocks.
- Major movements in prices which could be driven by a surprise earning growth.
- Pullback Trading
One of the key things to look out for in a pullback trading strategy is a stock with an established trend. Then the trader can closely monitor the trend until there is a decline in the price and if the price is upward, then that means that there is a downward price movement and this is the best chance for the trader to buy stocks.
As a forex day trader, you should always use technical charts to understand a stock’s trend. A god trader should look for a good trading company that will help in monitoring the trend that is happening in the stock markets.
- Breakout Trading
Breakout trade simply occurs when the stock prices rises above or below the former price. Breakout is normally not easy to notice from the charts and hence buying after breakout is not easy. An investor should monitor the level of stock trading volume because breakout trades on high volume are more likely to be sustainable at high prices.
In some cases, lower volume breakouts are likely to decline below the resistance levels and hence making it hard to make profits. The best way to buy on a break out is to study technical analysis and draw appropriate patterns on the forex pair or stock.
- News Trading
This is one of the easiest ways that one can use to monitor stocks due to the fact that in an eventuality of a news event then the stock will react to the news event. When cases of bad news are in the limelight, as a trader you may borrow shares of the stock from the investment firm and then sell the shares that you have borrowed. If the price of the stock declines, then simply buy the shares back at a lower price.
When there is good news, then what you as a day trader should do is to buy the stock and then sell the shares immediately the price rises.
- Technical Analysis
Technical analysis is looking at patterns and trends. Things like pivots, triangles, upward or downward wedges, head and shoulders and much more. Looking for support and resistance lines. Using technical analysis is a good way to use breakout trading.
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