Top 5 Day Trading Strategies

Day trading is the process of buying and selling financial securities within a single day of trading. Day traders attempt to achieve profits by leveraging large amounts of capital whilst simultaneously taking advantage of small price movements in liquid markets. Day trading requires consistent, well prepared strategy in order to get the highest rates of success.

One of the top day trading strategies is referred to as an Entry strategy. Many day traders focus on the stock market, specific stocks are ideal for day trading. An entry strategy means that a day trader will seek two things in a financial instrument e.g. a stock, these are volatility and liquidity. Volatility measures the expected daily price range in which a day trader can operate. Liquidity means you can open and close on a position at a good price. Once you have determine what you are looking for and have sought out levels of volatility and liquidity with an Entry strategy you then need to identify entry points. You can do this by using Intraday candlestick charts or Level II quotes.

Another top day trading strategy is based on finding a target. Your trading style will effect the identification of a price target. Scalping is popular day strategy which is based on finding a target. It involves selling as quickly as possible. When trades become profitable the scalping strategy means that traders will sell as soon as a profit is made. With this type of day trading strategy the price target is narrowed down to just after profitability in a trade.

Fading is another good day trading strategy. Fading is based on a financial security which experience sudden, upward movements in price and value. This is constructed on the belief that stocks may be overbought and early traders may be opening on positions and taking profits or existing buyers may be exiting. The price target for Fading is when buyers step back into trades.

An additional day trading strategy is known as Daily Pivots. This involves trying to profit from a stock’s volatility in the space of a day. Day traders who use this technique aim to buy a stock at the low of the day, this is known as the LOD. They also attempt to sell at the high of the day, otherwise known as the HOD. A Daily Pivots trading strategy establishes the price target at the point where there may be signs of a change in movement patterns.

Finally, another top day trading strategy is referred to as the Momentum strategy. This consists of making trading decisions based on news reports or spotting strong trending movements. These trending movements need to be supported by high volume. There are two types of Momentum day traders, some Momentum day traders buy into trades due to news reports and then hold on to their positions until there are signs of reversal. Others attempt to fade surges in price. The price target in this type of day trading strategy is when volume in price movements start to decrease.

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment. 

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