Day Trading Strategies [Infographic]
Day trading strategies aren’t one-size-fits-all. Find the strategy best fitting your style and goals, and hone your skills for successful day trading. SureTrader provides you with the tools you’ll need to discover the ideal trading strategy for your purposes. That’s just part of the SureTrader advantage.
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If you’re seeking a simple way to day trade, range trading will fill the bill. You’re following the stock’s range, with the plan to buy at its lower level and selling near its higher, resistance level.
One caveat: This isn’t necessarily the most profitable way to trade, because ranges tend toward the narrow. Still, it’s an easy strategy to master and serves both short and long-term traders. Tools needed for range trading include:
- Stochastic indicator – helps identify the range
- Bollinger bands – quite technical, but provide first-rate analysis
- Commodity Channel Index – used for stocks and commodities, the CCI measures a security’s current price relating to its average price over a particular period.
Swing trading takes place in a longer timeframe than day trading. Expect to hold securities for 10 days, on average. With this strategy, you are aiming for different types of stocks than those on which day traders’ focus. Good swing trade stocks and timing include:
- Large caps – the biggest companies on the exchanges
- Big name stocks with which you are personally familiar
- Markets that aren’t running particularly hot or cold, or bullish or bearish.
This is another strategy that’s relatively simple to master. You’re looking for the trend, and buying or selling once you identify it. It’s not the type of trading to do if you want to make a “killing,” but if you’re more interested in making a steady profit, give swing trading a serious chance.
Traders take positions depending on the way the trend trades. If it’s rising, you take a long position. If it’s downward, you’re going short. Although trend trading isn’t difficult to learn, it does require use of a large toolkit for maximum success. You’ll utilize various indicators in making trading decisions, including:
- Directional indices – measures not only the trend’s direction, but its relative strength
- Moving averages – average stock price for a predetermined number of days
- Relative strength indicators – rate of a stock’s price movement
- Stochastic indicators
- Volume measurements – how much the asset is traded in a specific period.
Once you’ve identified the trend to your satisfaction, ride that wave.
Stocks with strong momentum move a lot during a trading day. The day trader looks to purchase those securities just before they make their major move. Here’s what the trader looks for after identifying a momentum stock via an oscillator or another form of technical analysis:
- A specific event – movement occurs due to a change in the company or industry, such as an acquisition.
- Selling prior to the momentum’s top – cash out just before the momentum’s pinnacle, when it changes direction.
- Wait and see – traders must decide how long to hold on to a particular stock depending on the momentum – up or down. That might last 15 minutes, or the whole trading day.