Day trading strategies and techniques

 Day trading strategies and techniques

One of the best ways to make money trading stocks is by day trading. While there are many different types of trading styles, such as swing trading and position trading, you can easily use both within a day-trading strategy:

A swing trader typically keeps his holdings open for anywhere between 3 and 10 days, while a position trader keeps his holdings open anywhere from six months to several years. Day traders use both strategies when they trade stocks during one single day.

Successful traders don’t just implement their strategies once they get started; however – before ever putting on any trades, successful traders are already aware of all the factors that may affect the successful execution of their plan.

Saxo NL has good professional brokers who provide access to everything you need to get started.

Strategies and techniques to get started with day trading:

There are 5 important factors that affect whether or not a stock is in demand at any one time. These include price, volume, supply and demand, volatility and market psychology. Market psychology refers to human behaviour; it’s how traders feel about the market at any given moment. It’s important to keep all of these factors in mind throughout your trading journey. 

Now, let’s look at the various strategies and techniques that you need to know in this line of work.

Use Fibonacci Retracement Levels to your advantage

Fibonacci retracement levels make use of horizontal lines to indicate support and resistance levels that are likely to occur during a price move. 

Resistance and support levels are always crucial to day traders

Resistance refers to any level where selling pressure overwhelms buying pressure, causing prices to fall. Support refers to any price level which causes buying pressure within the market to overcome selling pressure. When resistance levels occur, they become support levels after prices drop; when support levels occur, they become resistant if prices rise again.

Horizontal trend lines

Horizontal trend lines and channels should also be used frequently while researching and analyzing stocks for potential purchase or sale -the image above demonstrates how they work.

Simple moving averages

Use simple moving averages to determine whether or not a stock is in demand, and also anywhere where momentum might start building.

20-day and 50-day simple moving averages can be used because, over time, one will always cross the other. When the 20-day crosses up through the 50-day moving average, it’s generally considered that buyers are beginning to take control of the market within that given stock – momentum is picking up. The opposite applies when the price moves down through a lower support level: sellers are taking control of the market at this point.

Identifying trends

It’s often said that “the trend is your friend.” If you can accurately identify the overall trend of a stock, then you can potentially ride that trend for all it’s worth. Trading against the trend is a lot riskier and less profitable than trading with it.

For day traders, first impressions are important. You’ll want to begin your analysis by looking at how the price has moved throughout the last one to twelve months. This information will give you an overall idea of whether or not demand is high or low within the market. If the price has moved up steadily during this period, the chances are that demand is starting to build momentum.

Candlestick charts

Use candlestick charts to analyze stocks instead of relying on line charts and bar graphs that display only simple open-high-low-close prices. Candlestick charts can reveal necessary information about a stock’s past performance line, and bar graphs often do not. For example, the image above demonstrates how candlestick price action can indicate resistance or support from an entirely different perspective.

There are many different types of candlestick patterns to use when researching and analyzing stocks. As a day trader, you’ll want to focus mainly on reversal and bullish/bearish continuation patterns.

The shooting star and hanging man patterns can be used as reliable reversal signals during an upward trend. They tend to signal that momentum within the market is starting to fade and that prices will soon fall again.

William Castro