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Day Trading strategies & rules

 Day trading is the most risky trading techniques and it’s not advisable for small investor and that a reason security and exchange board places some restriction.

Long term investor buying the partnership in the company and day trader simply gambling, that’s a basic difference in investing and day trading.

Stock | Index | ETF | Option day trading is the extremely risky and can result in substantial financial losses.
To minimize risk and make money in the market here is some day trading tips for your day trading strategies. Before to start’s trading you need strategy suitable to your investment criteria and risk tolerance. To become successful day trader strictly follow your day trading rules and in the case of failure analyze your rules and find out what was wrong and try to improve, keep this process continuous.

Instrument

First thing decide instrument, what you want to use for day trading.

You can choose stock, index, ETF, option, commodity or future. If you like to trade sector then sector related ETF is the best choice.

Note: Majority ETF has low beta means percentage of movement is low. Especially for day trading I like instrument that has high beta, with high beta instrument risk is a major problem because high beta high risk same way high risk high return low risk low return.

So stay clear with your strategy how much risk you like to carry and decide instrument.

Stop Loss

Day trading without stop loss is not a low risk high return strategy. To limit your risk use stop loss tool and decide stop loss before to trade. You can use moving average, pivot point as a stop loss.

Real Time News

For successful day trading real time news is important tool because every second make a big difference in price movement so you need real time news and ability to analyze and convert that in profitable trade. Majority of news comes very clear; in first look you can tell it’s affect on stock price and market movement that you can easily trade positive. Economic data, FED policy change, low change by government, company earning result, new product, new service news you can easily convert in profitable day trade. Aware to penny stock tips and news, make sure you using reliable news source.

Time / Sales

All real time data provider giving time / sales data, you need to watch that closely, look for abnormal trade size, in the case of real large quantity you see with asking price or more that’s a clear indication of stock gone with some strong hand, you can take advantage of that by taking long position. Same way if you see abnormal quantity with bid price or less, then it’s time to enter short and exit from long position. Naturally every day in all stock you can’t find this but Patience is a name of game. This is the best day trading strategies.

Day trading using chart pattern

There are many different proven chart patterns to find potential entry or exit for day trading and investing.

Here is the list of most popular chart patterns that you can include in your day trading strategy
  • Double Bottom
  • Double Top
  • Head and Shoulder
  • Handel and Cup
  • Flag
  • Ascending Triangle
  • Descending Triangle
  • Diamond
These all popular chart patterns gives best and accurate result if you combine with some technical indicators like rate of change (ROC), Relative strength Index (RSI), Commodity channel index (CCI), Moving average, ADX there are many indicators

Day trading using Technical indicator

Technical indicator is a very important tool to know stock market trend, in day trading it’s an important to know short term market trend that you can find out using technical indicator. Using technical indicator you knows strength and trend of the stock market and you can easily identify entry and exit point for day trading. If you use momentum indicator like Relative strength Index (RSI), rate of change (ROC) or Commodity channel index (CCI) with moving average with small time frame that’s a good combination of technical analysis and that gives the best return on your investment

Right time entry

In your strategies right time entry is the most important part. Most effective day trading entry point is strong support and breakout of strong resistance. When stock price hit strong support demand zone, it’s a lowest risk entry point with highest return opportunity, same way in the case of strong resistance breakout also a lowest risk entry point for long position. For short entry you can enter short at strong resistance or breakdown of strong support. In this strategy you can minimize your risk of day trading.

Right Time Exit

Your bank balance grows like crazy if you have right strategy for day trading. Exit from your position is more important then entry, because if not exit right time there are 100% chance your profitable trade convert in loss. 50MA, 200MA, Fibonacci number or strong resistance you can consider for exit strategies from your day trading position.

Considering all above day trading tips plan your day trading strategies and strictly stick with that for any kind of day trading including penny stock trading. Applying same rules with larger time frame you can use it for swing trading or even stock investing. After position closed analyze your trade and update your trading rules.
Related reading

Day Trading Basic for Stock Market
How to use technical indicators for Day Trading
How to find stock for Day Trading
Success strategy
  



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