Quite a few people seek to make money with day trading strategies, but such activities are highly risky.
Investing for the long term by buying and holding investment instruments can make a lot of sense, especially after studying the history of a specific company or industry sector and the market potential of its associated services and products.
Day Traders, instead, tend to only look briefly at a company or investment vehicle before deciding to buy or sell.
Many industry experts think this is not much better than common gambling, which is why the Securities and Exchange Commission has tried to protect small-fund investors by placing a number of restrictions on how they are allowed play the stock market in this manner.
This article will demonstrate 4 main trading strategies that has been successful.
Successful Day Trading Strategies
The following trading strategies explain how to reduce your risks and increase your chances of making money with day trading.
1) Picking the Instruments
You should begin by deciding on your favored instruments for investment . You can choose:
Each instrument has its own quirks and risk levels. If you prefer to focus on an entire economic sector such as commercial real estate, then choosing sector-related ETFs is your best bet.
Please note that most ETFs show low beta, which means that large changes in the stock market will produce smaller changes in those ETFs.
High-beta ETFs that change a lot when the stock market rises or falls are better for day trading. You have to be careful when picking your trading strategy.
In any case, you should decide up front which instruments will work best for your preferred levels of risk.
2) Stop-Loss Orders in Day trading
Without stop-loss orders it is like walking on a tight wire without a safety net. A serious fall can hurt you badly.
Before you accept an investment, set up a stop-loss order to prevent the possibility of losing all your money before you realize what is happening.
Moving averages and pivot points are good indicators for stop-loss orders.
This is a very popular trading strategy.
3) Real Time News
One of your most important tools for seeking profits and avoiding losses is a reliable source of real-time news.
Impressive numbers of stock-market traders jump every day on the latest news as the basis for deciding to buy new instruments or to sell their current holdings, which means that even a few seconds may make the difference between making money and losing money.
Events that instantly affect the stock market may include:
- Report on general economic activity from a government or private agency
- Press release about a company's current earnings
- Policy change at the Federal Reserve
- Product or commercial-service announcement
- Significant political development in a major trading country
- A sudden natural disaster.
Subscribing to a penny-stock news-reporting service can be useful, but the quality and reliability of such services may vary greatly.
Some day traders set up a suite of custom searches at a major search engine that returns a steady stream of relevant news.
→How to do news trading in the right way
4) Time Over Sales
Closely monitoring real-time sales data is critical.
If unusually large orders for an instrument appear at the current asking price or above it, then you can take advantage of this by entering longer positions.
Waiting for the strong demand behind this behavior to further increase the instrument's asking price can result in a hefty profit.
Likewise, seeing unusually large orders at the current bid price or lower quite likely means it's time to enter short positions and to abandon longer positions for that instrument.
This sort of potentially profitable event does not happen often, but patiently waiting for such opportunities is the most likely path to success with trading strategies.
Key Take Away
No matter what day trading strategies you adopt, consistency is the key. Make a plan, and stick with it.
Even penny-stock trading falls under the same rules.
Traders who keep their hearts still and their eyes open will always do better than wild traders who don't think first.
Stay calm and focused, and you will find your way to wealth.
Next week we will provide you with another 4 day trading strategies that will make you be a successful day trader.
→4 timeless day trading strategy you should know