Intraday trading has a huge potential to give you solid returns within a day. However, to make good returns, it is important to learn the basics of day trading in order to avoid incurring losses.
Intraday trading techniques play an important role when you are looking to capitalise on frequent and small price movements. An effective strategy is based on the in-depth technical analysis. It is advisable that you study the technical details right from the basic level to advance in order to make good trading decisions.
In this article, we will tell you everything about day trading strategies that include reading charts, indicators and patterns to predict future price movements. All you need to do is, find the most suitable strategy from amongst the numerous day trading strategies that suit your specific trading style and requirements.
Day Trading Strategies That Work
Breakout strategy centres around the stock price moving beyond a defined support or resistance level with increased volume. Here, the day trader enters into a long position after the stock price breaks above resistance. Likewise, he enters a short position after the stock price breaks below support.
When the stock trades outside the specified price band, it typically sees huge volatility which leads to price movement in the direction of the breakout.
While trading in such a phase, you need to properly plan your entry and exit points keeping in mind the support and resistance levels.
Scalping is one of the most popular trading strategies in the forex market. It focuses on taking advantage of the minute price changes instead of waiting for larger moves. The strategy here is to make many small profits from a large number of trades throughout the day.
Scalpers use technical analysis. Here, you need to research and find out stocks that are volatile and liquid in nature.
Momentum is another popular day trading strategy among beginners. Here, intraday traders execute their trades on the basis of news inflow in the expectation of high volatility with the support of high trading volume. Here, you identify a stock that showcases ample opportunity and hold on to your position until you see signs of reversal and then take an exit.
This is an easy and workable strategy provided you keep a track of upcoming news and earnings announcements.
Reversal trading, also known as trend trading, pull back trending and a mean reversion strategy is another intraday trading technique that is used all over the world. To adopt this strategy, you need to conduct an in-depth market research, gain knowledge and experience before you enter into big trades.
In this strategy, you aim to trade against the trend. Here, you have to identify possible pullbacks as well as predict their strength.
- Using pivot points
A pivot point is defined as a point of rotation. Here, you consider the previous day’s high and low prices as well as the closing price of the stock to calculate the pivot point. It is an ideal strategy for identifying and acting on critical support and resistance levels. This strategy is primarily used for forex trading.
Range-bound traders use this strategy to identify points of entry, while breakout and trend traders use this strategy to identify key levels that need to break for a move to count as a breakout.
The above-mentioned are the sure-fire strategies that work for intraday trading. Your profit at the end of the day will hugely depend on the technique you employ. Along with these strategies, one important thing to consider is technical analysis; it will help you validate your strategy.
Whichever technique you employ for trading, remember to analyse your risk appetite and act accordingly in order to avoid huge financial setbacks. Also, remember that for a strategy to work accurately, you need to practice and be patient. For intraday trading assistance, you may get in touch with Kotak Securities.