Day trading is where you buy and sell a financial asset in a single day. In other words, day traders do not hold their trades overnight. The idea is to make a profit from market price changes.
It is a short-term trading style where you end each day with a profit or a loss. Successful day traders can make 6 figures in just a few hours. Whenever you play the markets, the higher the reward, the greater the risk. There is no ‘magic winning strategy,’ but there are tried and tested formulas for playing the markets. What is the best day trading strategy?
Are you a Day Trader?
Before we can look for the best day trading strategy for beginners, it is important to answer the question: is this right for you? To be a successful day trader, you need to have the time to analyze the markets and monitor your trades throughout the day. If you want to play the markets on the side of your full-time job, this may not be the best form of trading for you.
Traders looking for longer-term investments without the pressure to buy and sell in a single day should consider swing trading. Or if you want even quicker turnovers than day trading, you should check out scalping.
Best Day Trading Strategies
As we said earlier, there is no single winning formula. Some traders may prefer to analyze charts and make their trades according to patterns and trends. Other intraday traders base their trades on news announcements and current affairs that impact the market. That said, there are popular day trading strategies that every trader should know. Here are 5 strategies used by day traders.
Trading the News
News trading does what it says on the tin: basing your trades on what is going on in the news. It is perhaps the most traditional of all of the day trading strategies. Instead of analyzing charts and using technical insight and analysis, you read the news. We’re not just talking about CNN here. News traders will also read economic reports such as those released by governments on unemployment and interest rates, as well as breaking news.
If you have a deep understanding of the market in which you are trading and follow developments closely, this could be an effective day trading strategy for you. Can’t get enough of Bitcoin? Trading based on crypto news could be worth looking into.
This simple but effective strategy uses pairs to make trades. If you are trading in pairs, you will buy (‘go long’) in a strong stock and sell (‘go short’) in a long one. This is a popular day trading forex strategy as currencies go in pairs.
Trend traders use trends in the markets to make their purchasing decisions. A trend is the direction of the market or the movement of an underlying asset. An “uptrend” occurs when prices are moving to the upside, while in a “downtrend” prices are in decline. If you are a day trader using this strategy, you will look at a long-term time frame and look for a trend going through.
Day traders using a countertrend trading strategy basically follow the same as the above, except in the opposite direction. In other words, you look for a downtrend and bet against it before it changes. This is also known as the “contrarian strategy” and if done correctly countertrend trading can yield high profits.
This popular day trading strategy is based on trading stocks, currencies, or other assets after the price breaks. A ‘break’ occurs when a stock or security’s price makes a sudden movement, such as a sharp increase or drop. Breakout traders go long when the price breaks higher and go short when the price breaks lower. Breakout trading can be lucrative, but this strategy requires fast decision-making with quick entries and exits.
Get Day Trading Tips From Experts
Choosing the right broker is just as important as finding the best day trading strategy. Make sure you do your research and find an online broker who ticks the boxes you need (market insight tools, customer support, and trading options).
TradeOr is an online brokerage platform that is making waves with beginner traders. This new platform lets you trade forex, crypto, and more with added leverage. TradeOr also offers 24/7 customer support and charges 0% commission. Traders use this broker for its cutting-edge tools for market analysis, such as TradingView.