While successful day traders need stock trading strategies, such techniques are not one-size-fits-all. A day trading technique that works well for one person may not suit another trader. All day trading strategies, however, depend on data. It’s what particular data a day trader finds most valuable that gives rise to his particular stock trading strategy.
Day Trading Strategies
All day trading techniques rely on having as much information as possible. That means keeping up with national and international economic news and visiting reputable financial websites daily. Technical trading charts keep you advised of specific stock trends. All of that information helps day traders when using any of the top strategies:
Breakout
The breakout is a stock’s rising above its resistance level, usually accompanied by high volume. Spot breakout potential via technical trading charts showing nearly completed flags and triangles are a good indication of breakouts. There’s also the opposite trend – the breakdown.
Momentum
Trading a stock with huge upward momentum. This momentum occurs because of a specific event, such as acquisition or unexpected earnings growth.
News
Announcements affect prices, either up or down. Short a stock if the news is bad, buy when the news is good.
Pullbacks
When stocks start falling downward from a peak, it’s often a good time to buy if the day trader feels the overall trend is upward.
Scalping
This strategy aims at small moves in prices for gains. Successful scalping means doing a lot of quick daily trades, but those small moves can add up to a decent return.
Data to Consider
What’s the best data to consider when making stock purchases? Market capital isn’t a huge indicator, but it is still worth examining. A company with negative earnings per share isn’t worth your while. In most cases, it doesn’t make sense to buy a company losing money. The most important data to consider, no matter your strategy, includes:
- Momentum – Or its lack.
- Trending – Current events.
- Volatility – Daily price range.
- Volume – Daily amount of trading.
Time and Money
Figuring out a risk strategy for day trading is crucial. Generally, day traders don’t risk more than 1 to 2 percent of capital on any individual trade. Day trading also requires a lot of time, including considerable chunks put into research and market tracking. Remember that even top traders only “win” about 50 percent of trades. They also set a maximum amount they can afford to lose daily, and stop for the day if that number is hit. That’s a wise strategy for any day trader.
Building Day Trading Strategies with Financial Power
At Financial Power, we help our clients build the day trading strategy that works best for them. We offer up-to-the-second data and lightning fast execution. Get started by using our $100K demo and find out which types of stock trading strategies you prefer, before risking a dime of your own money. Developing confidence in a good day trading strategy is essential for successful trading.
