10 day trading strategy for beginners

Day trading is the buying and selling of financial instruments within the same day or multiple times over the course of a day, taking advantage of small price movements can be a lucrative game if played correctly, but can also be a dangerous one. For beginners or anyone who doesn’t follow the strategy in mind, moreover, not all brokers are suitable for trading large volumes on a daily basis, however some brokers are designed with the day trader in mind. Check out our list of the best brokers for day trading to see which one best suits those who want to day trade.

Online brokers in our list include Tradestation, TD. Ameritrade and Interactive Brokers offer professional or advanced platforms that include real-time quotes, streaming, advanced charting tools, and the ability to quickly enter and edit complex orders.

Let’s look at some common day trading principles and then decide when to buy, some common day trading strategies, basic charts and basic patterns, and how to limit losses.

In addition to knowledge of basic trading procedures, day traders also need to keep up with stock market news and the latest events that affect stocks such as the Fed’s interest rate plans, economic outlook, etc. So do your homework. Make a wish list of the stocks you want to trade and keep you informed about selected companies and the general market, scan business news and visit trusted financial websites.

2. Determine grants

Assess how much you’re willing to risk on each trade. Many successful traders risk less than 1% to 2% of their account per trade if you have a $40,000 trading account and are willing to risk 0.5% of it. Your capital on each trade, the maximum loss per trade is $200 (0.005 x $40,000), allocate the excess amount you can trade with and you’re ready to lose, remember it may or may not be. does not happen

3. Set the time apart with

.

Day trading takes your time that’s why it’s called day trading you will have to give up all day in fact don’t consider it if you have time. This process requires the trader to track the markets and spot opportunities as they can arise at any time during the trading hours, moving quickly is the key.

4. Start small

As a beginner, focus on one to two stocks during the sessions, it’s easier to follow and find opportunities with just a few stocks.

Recently, it has become more common to trade fractional stocks, so you can specify a dollar amount less than what you want to invest in. That means if Apple stock is trading at $250 and you want to buy it. For just $50, many brokers will allow you to buy one-fifth of a share.

5. Avoid penny stocks

You may look for offers and low prices. But stay away from penny stocks, these stocks are often illiquid and the chances of hitting the jackpot are bleak, many of which trade below $5 per share become delisted from major stock exchanges and can be traded for $5 a share. Trade over the counter (OTC) only if you don’t see real opportunities and do your research to be clear on these things.

6. Those trade times

A large number of orders that investors and traders start to execute as soon as the market opens in the morning, causing price volatility, an experienced player may be able to recognize patterns and make the right choices to make a profit, but for beginners it may be Better to read the market without doing anything for the first 15 to 20 minutes, mid-hours tend to be less volatile and then the movement starts to pick up again towards the closing bell, although rush hour gives an opportunity. But it’s safe for beginners to avoid in the first place.

7. Reduce your losses with orders limited

Decide what type of orders to enter and exit a trade, whether you will use market or limit orders. Orders ?When you place an order in the market, the order will be executed at the best available price at that time, so there is no price guarantee.

At the same time, limit orders are price guarantees. But not execution. Limit orders allow you to trade with more precision where you set your prices. (not unrealistic For more buying and selling, sophisticated and experienced day traders may use the use of options strategies to hedge their positions as well.

8. Be realistic about profits

Strategies don’t need to win all the time to make a profit, many traders only win 50% to 60% of their trades, however they make more money for winners than they lose, make sure to risk on each trade. is limited to a specific percentage of the account, and the entry and exit methods are clearly defined and recorded.

9. stay cool

There are times when the stock market will test your anxiety. As a day trader you must learn to nurture greed, hope and fear. Decisions should be based on logic and not emotion.

Successful traders must move fast. But they don’t have to think fast, because they have developed a futures trading strategy with the discipline to stick with it, it is important to follow your formula closely instead of trying to chase profits. Your emotions get the best out of you and abandon your strategy.There is a mantra among day traders: “Plan your trade and trade your plan.”

Before we get into the ins and outs of day trading, let’s look at some reasons why day trading is so difficult.

Day trading takes a lot of practice and knowledge and there are many factors that make the process challenging.

First of all, know that you are facing professionals whose career is related to trading, these people have access to the best technology and connections in the industry, so even if they fail, they are ready to succeed. Ultimately, if you jump on the wagon, it means more profit.

Uncle Sam will also want to reduce your profits, remember that you will pay taxes on any short-term gains or any investments you hold for one year or less on the gross margin.Even one thing is that your losses will offset any gains.

As an individual investor, you may be prone to emotional and psychological biases, professional traders can often cut their trading strategies out of these. But when it has to do with your own capital, it tends to be something else.

Day traders try to earn money by taking advantage of price movements in individual assets (stocks, currencies, futures and options), taking advantage of large amounts of capital to do so. Deciding what to focus on – in stock speaking – the average day trader looks for three things:

• Liquidity: Liquidity allows you to enter and exit the stock at favorable prices, for example, tight spreads or the difference between the bid and ask prices of the stock and low slippage or divergences. The difference between the expected price of the trade and the actual price
• Voltility: Volatility is simply a measure of the expected daily price range that a trader operates in. More volatility means more profit or loss.
• Trade Volume: This is a measure of the number of times a stock is bought and sold in a given time period, most commonly known as the average daily trading volume. Stocks An increase in stock volume is often a harbinger of price jumps, either up or down.

When you know what type of stock You will need to learn how to identify the entry point – that is the precise moment you will invest. Tools that can help you do this include:

• Real time news service: stock moving news, so it’s important to subscribe to a service that tells you when market moving news might come out.
• ECN Bid/Level 2: ECNs, or electronic communication networks, are computer systems that display the best available bid and ask prices from multiple market participants, then match and act accordingly. AutoFix Level 2 is a subscription service that provides real-time access to the Nasdaq order book, which includes quotes from registered market makers across all Nasdaq security and OTC Bulletin Boards. Together, they can give you the feeling of order being executed in real time.
• Candlestick Charts Intraday: Candles provide a raw analysis of price action, more on these later

Define and write down the conditions in which you would enter a “buy on an uptrend” position is not clear enough, something like this is more specific and testable: “buy when price breaks the upper trendline of the retraceable triangle pattern”. in which the triangle is preceded by an uptrend (at least one swing high and swing high before the triangle) two-minute chart in the first two hours of the trading day.

Once you have specific access rules in place, scan the chart further to see if those conditions build up each day. If you want to trade day to day every day and more often than not move the price in the expected direction, then you have potential the starting point for the strategy, then you Have to evaluate how to exit or sell those trades.

Decisions when to sell

There are several ways to exit winning positions, including trailing stops and profit targets. Profit targets are the most common exit methods with profit at a predetermined level. Some common price target strategies are:

In most cases you will want to exit the asset when there is a decline in interest in the stock as indicated by the 2/ECN level and volume. Losing trade. If your Stop Loss is $0.05 away from the initial price, your target should be greater than $0.05.

Just as your starting point determines how you will exit your trades before entering them, the exit criteria must be specific enough to be repeatable and testable.

To help determine the appropriate time to buy stocks. (or whatever asset you trade) Many traders use:

• Candlestick patterns including flooded candles and dogis
• Technical analysis including trend lines and triangles
• Volume – increase or decrease

There are many candlestick setups that day traders can look for for entry points, and if used properly, the doji reversal pattern (highlighted in yellow in the chart below) is one of the most reliable.

Usually look for patterns like this, with several confirmations:

1. First look for volume spikes which will show you if traders are supporting the price at this level. Note: this can be either on the doji candle or on the candle immediately after.
2. Secondly, look for previous support at this price level, for example, the previous low of the day (LOD) or the high of the day (HOD).
3. Finally, let’s look at the Level 2 scenario, which shows open orders and total order sizes.

If you follow these three steps, you can determine if the doji is likely to produce a real recovery and can take positions if conditions allow.

The traditional analysis of chart patterns also provides profit targets for exits, for example, the height of the triangle at its widest part is added to the triangle’s breakout point. (For an upside breakout) gives the price to take profit.

Stop loss order is designed to limit loss on positions in security, for long positions stop loss can be placed below the minimum or short position above the maximum, it can also be based on volatility. For example, if the stock price moves around $0.05 per minute, you may place a $0.15 stop loss out of your entry to allow price to fluctuate before it moves in your expected direction.

In the case of a triangle pattern, for example, the stop loss can be placed $0.02 below the last swing low when buying a breakout or $0.02 below the pattern ($0.02 is random and is specific point)

One strategy is to set two stop losses:

1. Physical stop-loss orders are placed at certain price levels that suit your risk tolerance, essentially this is the most money you can tolerate
2. Mental stop loss imposed at the point where your entry criterion is breached, meaning that if the trade causes an unexpected turnaround, you will immediately exit.

However you decide to exit your trade, the exit criteria must be specific enough to be tested and replicated.Also it is important to set a maximum daily loss you can withstand both financially and mentally. Wherever you reach this point, take a break.

Follow your plan and your perimeter, after all, tomorrow is another day (trade).

Once you have determined how to enter a trade and where you will place your stop loss, you can assess whether the potential strategy is appropriate for the risk. risk

If the strategy is within your risk limits, then testing begins, go to the history chart manually to find your entries manually, observe whether your stop loss or target will be affected, paper trade too. This way at least 50 to 100 trades, observe if the strategy is profitable and if it meets your expectation, if so continue trading the strategy in real time demo account if it is always profitable. Two months or more in a simulated environment, execute the strategy trading with real money, if the strategy is unprofitable restart.

Finally, keep in mind that if trading on edge -which It means you are borrowing your investment from a brokerage firm. (And remember, the margin requirement for day trading is high) -you’re far more vulnerable to sharp price movements.Margin helps to amplify trading results, not just profits. But it is also a loss if the trade is against you, so using a stop loss is important when trading on margin.

Now that you know some of today’s trades, let’s take a look at some of the key strategies new traders can use.use

Basic day trading strategies

Once you have mastered certain techniques, developed your own personal trading style, and determined what your final goal is, you can use a set of strategies to aid in your pursuit of profits.

Here are some of the most popular techniques you can use, although some of these have been mentioned above. But it’s worth re-entering:

• • Trend Following: Anyone who follows trends buys when prices rise or sells when prices fall, this is done on the assumption that continued rising or falling prices will continue to do so.

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• Conflict Investing: This strategy predicts that price increases will reverse and fall. Investors buy in the fall or sell short in the uptrend, with a clear expectation that the trend will reverse. change
• Scalping: This is a style in which speculators take advantage of the small price gaps created by the Ask-Aid spread. Usually this technique involves entering and exiting positions quickly within minutes or a few. seconds
• Trading on the News: Investors using this strategy buy when good news is announced or sell short when there is bad news. This can lead to greater volatility which can lead to profits or Higher losses

Day trading is difficult to master, it takes time, skill and discipline, many people who try it fail. But the techniques and approaches described above can help you build a profitable strategy, with enough practice and consistent performance evaluations, you can greatly improve your chances of overcoming risks.

Article Source – Investopedia.com