Forex Forum Important Day Trading Strategies For Beginners and Forex Experts.
Day trading means buying a financial asset and selling it within the same day. It is a popular short term trading strategy, which if done in the forex market is called Forex day trading.
There are many different day trading strategies but the general idea is to open the trade close to the beginning of the trading day and close it before the market close. This style of trading is different to scalping, which involves very quick in and out trades often in the space of minutes.
Here are some tips for anyone interested in trying their hand and the high-risk, high-stakes world of day trading. You'll learn about Seven day-trading strategies that could work with a whole lot of work and a little bit of luck. You can try them out if you're looking to make cash buying and selling stocks within one day — but don't expect to succeed right away.
1. BreakoutBreakout strategies centre around when the price clears a specified level on your chart, with increased volume. The breakout trader enters into a long position after the asset or security breaks above resistance. Alternatively, you enter a short position once the stock breaks below support.
After an asset or security trades beyond the specified price barrier, volatility usually increases and prices will often trend in the direction of the breakout.
2. Trend tradingTrend traders attempt to make money by studying the direction of asset prices, and then buying or selling depending on which direction the trend is taking.
If the trend is upwards, with prices making a succession of higher highs, then traders would take a long position and buy the asset. If the trend is downwards, with prices making a succession of lower lows, then traders would take a short position by selling.
3. NewsForex news trading strategies pay less regard to the trend of the market and focus on the reaction of the price to a particular news event. In forex markets, news traders tend to focus on the weekly economic calendar to trade economic data releases like GDP or the consumer price index (CPI).
4. Scalping StrategyThe philosophy behind a scalping strategy is that small wins can add up to a lot of money at the end of the day. The scalper sets buy and sell targets and sticks to these predetermined levels. The scalping strategy is fast. It's not uncommon for several trades to be made within a few seconds.
Scalping is one of the best day-trading strategies for confident traders who can make quick decisions and act on them without dwelling.
5. ReversalAlthough hotly debated and potentially dangerous when used by beginners, reverse trading is used all over the world. It's also known as trend trading, pull back trending and a mean reversion strategy.
This strategy defies basic logic as you aim to trade against the trend. You need to be able to accurately identify possible pullbacks, plus predict their strength. To do this effectively you need in-depth market knowledge and experience.
6. Money flowsThe money flow indicator signals whether an asset might be oversold or overbought – using volume and price rather than the asset's price alone.
It works by comparing the number of trades from the previous day to the current day, to determine whether the money flow was positive or negative. A reading of 80 or higher indicates overbought conditions and is a signal for the trader to sell. Whereas a reading of 20 or below indicates oversold market conditions and is a signal to buy.
7. Simple strategies using indicatorsThe classic day trading strategy involves the use of indicators, such as a pair of moving averages. Traders will typically plot a faster and a slower moving average together, perhaps lines drawn over say 5 and 20 periods. By definition, the 5-period line will be four times as sensitive as the 20-period version. This is because it's re-calculated four times for every time the 20-period line is updated. Having selected their moving averages, traders will then use the interaction between the two lines as a trading signal or indicator. The more sensitive or faster moving short-term line provides directional clues and definitive signals when it moves above or below its slower moving counterpart.
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