Day Trading Strategy
Day trading is a strategy of buying and selling assets inside a day. As the day goes on, prices go up or down in their values, creating the opportunities to gain or lose. It can bring big money but not in a short time. Day trading is not a sure road to immeasurable wealth and success. It is as all the other business ventures: in order to be successful at it, you need to have a PLAN.
Day trading requires a high attention from the traders, and they need to be present at the trading terminal all day long. It is accepted that the shorter the time frame the trader chooses to trade, the higher is the risk they are exposing themselves to. That’s why day trading can be described as one of the riskiest approaches to the currency markets. Anyone, traders who have years in the market and have lots of experience and enjoy the adrenaline of fast trading, are choosing day trading strategies and hitting the market successfully.
You should have a considerable amount of capital at disposal with a predefined risk/reward ratio. It is recommended to keep the trade size reasonably low.
A day trader should keep both eyes on fundamental analysis and technical stuff as well. Only the combination of both analyses would bring a good result. It is vital for a day trader to have as much knowledge as possible over the markets.
Even if you choose a day strategy, it is important to adopt your strategies with your current situation. A successful day trader must come up with a new strategy almost every other day, or at least adapt their current strategy to the new market conditions.
Success without discipline cannot be achieved. It is very important for you to monitor prices for wide periods of time without making any decisions. It needs lots of discipline. Just think that, if you rush on your decisions and after you see the market moving in the opposite direction with your decision, it hurts! So, it is better to waste an opportunity, than to guarantee a loss.
Forex scalping refers to forex traders who buy or sell a currency pair and then hold it for a short period of time to make a profit. A scalper seems to open many positions and make the most of the small price movements which happen randomly during the day. It seems like the profit is low per trade, like 5 to 20 pips, but if you increase the position size, you will see magnificent results.
Scalpers usually keep positions open for seconds to minutes and open and close multiple positions through a single day.
Scalping is mostly used after crucial financial data are released such as the U.S. employment report and interest rate announcements. This happens because these data bring immediate impact on price fluctuations in a short period of time. Due to the increased volatility, position sizes may be scaled down to reduce risk. While a trader may attempt to usually make 10 pips on a trade, in the aftermath of a major news announcement they may be able to capture 20 pips or more, for example.
A scalper does not try to trade with large moves or high volumes. They try to take the best out of the small moves that occur frequently and trade with smaller volumes more often. Since the amount of trading is small, scalpers look for more liquid markets to increase the frequency of their trades.
Swing trading is the style of keeping positions open and catching movements in a stock or any financial instruments during a few days to several weeks. Their first “gun” to reach the necessary information is technical analysis. They check for opportunities through graphs. They may use fundamental analysis in addition to analyzing price trends and patterns.
The goal of swing trading is to capture a potential price move. Some traders go after volatile markets with sharp movements, others prefer safe stocks. In either case, swing trading is the process of identifying where an asset’s price is likely to move next, entering a position, and then capturing a chunk of the profit from that move.
Successful swing traders are only looking to capture a chunk of the expected price move, and then move on to the next opportunity.
Swings trades typically get in the game when a trend breaks. At the end of a trend, there is usually some price volatility as the new trend tries to establish itself. The main goal of swing trading is to spot a trend and then capitalize on the swing lows as periods of buying, and the swing highs as periods of selling. Swing traders often search for markets with a high degree of volatility as these are the markets in which swings are most likely to happen.