For the right person, a day trading plan can be an exciting way to start making money every day on the stock, forex, or indices market. Regardless of what you choose to trade in, your intra-day plan will include buying and selling a wide variety of different securities each day – often over a 24-hour period. Used correctly, even a basic day trading for dummies strategy can help you to build your wealth and make a lot of money. However, it’s important to remember that deciding you’re going to day trade isn’t actually a strategy in itself. You need to figure out how you’re going to choose when to enter a position, exit a purchase and more if you want to make the most out of your cash each day. Here are just 3 of the most popular strategies that day traders use to make their fortune.
Trend trading is a strategy that investors use to make money by carefully evaluating the direction of different asset prices during the day. After evaluating the position of certain securities, you use the trends to buy or sell depending on which direction the market is moving in. If the trend goes up, with the prices getting higher and higher, then you would buy the asset and hope for the best. On the other hand, if the trend is moving downwards, you’d sell and cut your losses. The trend trading strategy can be used in virtually any investment campaign, not just day trading. After all, you can keep your position open for as long as the trend continues in the right direction. However, if you’re day-trading, you close your position before the day is over.
With a swing trading strategy, you take advantage of the short-term patterns in prices on the stock market. This strategy is based on the assumption that prices rarely go in one direction only in a trend. Swing traders look to make movements from the smaller up and down movements that happen during a short period of time. While most long-term investors and trend traders take advantage of the differences in the market that happen over several hours, the swing traders are looking at the small reversals in price movements that can take place in minutes. The key is to try and spot these reversals before they happen.
Finally, scalping is another short-term trading strategy that involves using short and frequent movements to make profits – often with a focus on a high win rate, rather than just a few huge wins. The idea is that you can build a big account by earning small profits frequently, rather than just waiting around for opportunities to make large amounts in one go. There’s a very strict exit strategy required with scalping, as your losses can easily counteract the profits if you don’t act with caution. Most scalpers will also close their positions before the end of the day to avoid losing out on their profit margins due to overnight changes.