The best day trading strategies evolve each and every year. New forms of analysis, pattern identification and much more can influence investors. And, as you may know, day traders are a different breed altogether. According to a Modern Trader report, there are over 13 million day traders worldwide.
4 Most Popular Day Trading Strategies
But, no two day traders think exactly alike. In fact, most of these investors have their own set of guidelines, concepts and even quirky superstitions. Whatever works to get ahead, they will use it. And they will keep using it until their luck runs out.
Yet, there are four popular day trading strategies that are most common in today’s stock market:
- Daily Pivoting
- Movement Trading
Each of these strategies uses different techniques. But deciding when to sell is a uniform concept. Day trading is a full-time job, and most traders will define exactly when they will sell before buying a stock in the first place. Let’s take a closer look at these four day trading strategies below.
These are known as “pivot points” that investors use as indicators. Specifically, they use the share price highs, lows and previous day closing prices to calculate pivot points for the current day. This has become one of the most common day trading strategies for determining market trends over different periods of time.
Fading is all about shorting stocks. And short selling is a trading concept in which you speculate on the decline of a stock price.
You begin by borrowing shares of a stock that you believe will decrease in value. Next, you sell these borrowed shares to buyers that are willing to pay the market price. Theoretically, you are betting that the share price will continue to decline before the borrowed shares must be returned.
You are betting on and profiting from the drop in stock price. However, this is a much more advanced form of trading that is not recommended for day trading beginners.
Did you know that news reports and financial updates can play a role in a stock’s growth or decline? Well, movement traders certainly do.
The movement strategy is built around recognizing trends and playing off news releases. The day trader will buy stock which has high volume support and ride it out until their are signs of the trend reversing. At this point, they sell their shares for hopefully a profit. It’s as simple as that.
Scalping is one of the most popular day trading strategies you can find. And this is because it eliminates as much risk as possible in a high-risk market. Day traders take on as much risk as anyone. But scalping helps lessen that risk by trading stocks as soon as the positions become profitable.
Scalpers aren’t willing to take chances and wait for larger returns. The moment a stock price becomes advantageous, the trader will sell for a small profit. By doing this many times throughout the day, these traders can build up hefty gains.
Best Day Trading Strategies for You
As you now know, there are various ways to go about day trading. Yet, this is much more than a hobby. Your dedication will have to go well beyond your trading time. It takes lengthy research and continuous oversight to become a day trader.
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