Day Trading strategies & rules
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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.
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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
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Double Bottom
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Double Top
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Head and Shoulder
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Handel and Cup
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Flag
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Ascending Triangle
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Descending Triangle
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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.
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