Day trading is the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game if it is played correctly.
Here are four such strategies for daily trading investors:
Cut Losses With Limit Orders: When you place a market order, it’s executed at the best price available at the time. Thus, no price guarantee. A limit order, meanwhile, help you trade with more precision, wherein you set an executable price for buying as well as selling. More sophisticated and experienced day traders may employ the use of options strategies to hedge their positions.
Momentum: This strategy revolves around acting on news sources and identifying substantial trending moves. You simply hold onto your position until you see signs of reversal. Alternatively, you can fade the price drop. You must ensure you’re aware of upcoming news and earnings announcements.
- Scalping: It capitalizes on minute price changes. The driving force is quantity. You will look to sell as soon as the trade becomes profitable. This is a fast-paced and exciting way to trade, but it can be risky. You need a high trading probability to even out the low risk vs reward ratio.
Using Pivot Points: A day trading pivot-point strategy can be fantastic for identifying and acting on critical support levels. It can be used by range-bound traders to identify points of entry. While trend and breakout traders can use pivot-points to locate key levels that need to break for a move to count as a breakout. A pivot point is defined as a point of rotation. You use the prices of the previous day’s high and low, plus the closing price of a security to calculate the pivot point.