Top 3 Day Trading Strategies for Beginners
Day traders aim to make higher profits from the stock market at the expense of larger loss potential. According to these investors, small daily profits can accumulate to big long-term profits using the right day-trading strategies. The given strategies prove helpful for anyone considering trying their chance at the high-risk, high-stakes world of day trading.
Learn how to trade the 3 best day trading strategies that could work with a little effort. If you are a beginner and finding out the best way to make a profit by buying and selling stocks within one day, you can give them a try, but don’t expect immediate success.
Momentum trading
An investor takes advantage of a stock’s rising price by using a momentum strategy. The criteria for finding momentum stock is rather limited – only a few out of 5,000 have the potential to fit the criteria on any given day. If you are using a momentum trading strategy, you should look for the following traits in stocks:
- – Price movement results from factors such as a larger company’s acquisition of a small company, a drug company’s new treatment, or surprise earning growth.
- – A 30-40% shift in the stock price.
- – Smaller companies with lower floats, which trade faster as there are fewer outstanding shares – the number should not exceed 100 million shares.
- – Using several tools, a financial communications platform, you can identify trends or ideas traded on.
Scalping strategy
Scalping is based on the idea that small wins can build up to substantial money over time. So scalpers set up buy and sell targets and adhere to them.
This is a fast-paced strategy. Here is no problem with multiple trades being made within seconds. However, traders with a strong sense of confidence and the ability to make quick choices and act on them without lingering on trades will do well using the scalping strategy.
On the other hand, Scalpers are disciplined enough to sell immediately after a price decline, thus lessening losses. Day trading is not for you if you have trouble staying focused and are easily distracted.
Breakout trading
A breakout occurs when the price of stocks moves higher to the previous top resistance level. This is not as straightforward as simply recognizing the resistance and buying when a breakout occurs. First, check how many shares are changing hands or how much trading volume is taking place.
This is because high volume breakout trades have a higher chance of being sustainable at the new price than high volume breakouts with less volume. Conversely, it is more difficult to profit from breakouts with lower volumes as they tend to decline below former resistance levels.
When the stock price reaches the resistance level, it will normally retreat until a catalyst increases. As the price rises above this point, more purchasers than sellers prevent further price appreciation.
Bottom line
Day trading risk is very high, resulting in substantial financial losses in a very short timeframe. Therefore, novice traders should invest the amount they can afford to lose. The above given day trading strategies could only be profitable if the traders take every move cautiously.
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