Trading Academy

Lesson 28

Day Trading strategies 

Day trading implies taking calculated risks to seek a profitable return, within a very short time span (minutes, hours).  In order to be successful as a short-term speculator you will need most or all of the following attributes: dedication, discipline, decisiveness, and perseverance. 

Say you have all those attributes – what next? 

Well, in Forex trading, there is no substitute for having a realistic and comprehensive trading plan that you are going to stick to.

Types of Day Trading Strategies

  1. Scalping – this is one of the most popular strategies. It involves the quick opening and liquidation of positions. A scalp trade usually lasts a few minutes at most. This type of trading requires a lot more attention from the trader in comparison to other trading styles. 

Scalp traders should primarily keep consistency at the forefront of their performance. Since this type of trading can be demanding and time-consuming, there is a great diversity of automated trading systems being sold online, which may shorten the time which must be dedicated to trading, while still being able to profit from the markets.

  1. Fading – this means trading against the current trend and it is for situations where price manages to breach a key level but without any follow-through, as price withdraws back within the range. An essential part of fading is identifying key support and resistance levels, which will help in establishing entry points. Keep in mind that this is a counter-trend trading strategy, and so it implies taking on additional risk.
  2. Pivot Points – these are daily support and resistance levels that are calculated from the previous day’s price data (Open, High, Low, Close). They delineate levels where the market might reverse. Find key horizontal levels of support or resistance and couple these with Pivot Points. Try to use them when the market is moving nicely (they are not that reliable in choppy markets).
  3. Momentum – momentum trading means finding intraday setups that allow you to follow the wider trend in pricing. This type of trading draws its strength in probabilities. If the market is moving with conviction in one direction, you should too. By keeping a close eye out for developing trends, you can apply short-term strategies to bring hopefully larger incremental returns.

Keep in mind:

Day trading can be a great source of income as long as you correctly apply the strategies and you display the attributes that are necessary for this highly active type of trading.

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