Having a strategy will be your guide to operating the financial markets. It is one of the most crucial parts to accomplish while becoming a professional trader. Due to this, I will teach you five Day Trading Strategies you can apply immediately to be a better trader.
Every strategy has specific characteristics. Some put more weight on technical analysis, and others imply opening and closing trades within seconds. But do not worry, in this article I will give you every detail about them.
Keep reading! Learn what to consider while applying a strategy and how to choose the best option for you.
How Many Day Trading Strategies Are There?
It’s hard to answer precisely about the number of strategies that exist. Even though there are some general strategies, you should consider that any trader can create one on their terms. For instance, there can be as many strategies as experienced traders.
In the broad term, we can consider that there are between five or six main strategies. Later in this article, I will teach you about them.
Many traders choose one of the main ones at the beginning of their careers. And, as they advance, they start changing it to adapt it to their necessities.
Keep that in mind. Because in the end you may choose one of the following; but in the future, you should consider modifying it as long as you move on in your trading career.
Which Strategy is Best for Day Trading?
Day Trading is the style that implies you sell and buy securities within a day. It means you open and close trades on the same day seeking profit.
Your operations will be considered Day Trading only if you open a position and close it minutes or hours later. If you are not very familiar with this style or other basic concepts of financial trading, do not worry! Catch up with the free course we have at MDC Trading Academy and become a Day Trader.
There is no such thing as a better strategy for Day Traders. A strategy is only good if it suits your objectives as a trader, the amount of capital you are willing to invest, and your necessities.
Consider your experience and your knowledge of technical analysis while Day Trading. It is essential for this type of style.
What is the Most Profitable Day Trading Strategy?
You can not determine what the most profitable Day Trading Strategy is. You need to consider some variables, such as the trader experience, amount of capital, type of financial asset, and market.
Even if two traders choose the same strategy, the profitable results may be different.
Seeking profit is also one part of being a successful trader. You could also consider risk management to minimize your losses. Day Trading requires a high number of trades. For instance, you should manage your capital correctly.
List of Day Trading Strategies
Remember that Day Trading implies selling and buying within the same day. It means you will profit from the little price movements of the financial asset during the day.
For the previous reason, the following three components are essential for Day Trading:
- Liquidity: is the ease of converting a financial asset into cash. Also indicates the certainty that one security can be bought or sold quickly.
- Volume: this represents the number of securities traded within a period. It means that there exists significant interest in a financial asset.
- Volatility: is the movement of a financial asset’s price. A higher volatility means higher risk.
The following are some of the most used and well-known Day Trading strategies that work:
Trading News
The Trading News strategy seeks to find trading opportunities through understanding about what is happening in the world. Regarding economics, politics, finance, or any event which can influence the financial markets.
Considering this strategy implies a broad knowledge of good and trustworthy news sources. Thus, reliable information and a sense of understanding of the impact of each event on the financial asset’s price are needed.
Finally, the ability to discern between news is crucial to dismiss the ones that don’t impact as much the financial markets.
Scalping
The objective of Scalping is to seek profit in the tiny price changes of a financial asset during a day.
To apply this strategy, you need to open a position and close it in seconds or a couple of minutes. It requires a highly volatile market, so the price can go up and down constantly while you’re in the process of buying and selling.
To be profitable you will need to accumulate many winning positions. The number can be up to a hundred or more.
If you are a beginner, you should not try this strategy because it requires a high-level experience in technical analysis. Plus agile thinking and knowledge of trading indicators.
On the other hand, if you think you are ready for this strategy or want to learn the one we developed at MDC Trading Strategy, I invite you to join our Senior Trader Course.
Be into the next level of trading with us!
Daily Pivots
Using the Daily Pivots strategy requires an understanding of support and resistance in trading. These terms refer to financial assets’ price levels indicated on charts. It shows low and high pauses in their price movements.
Support refers to a type of floor that prevents the price of a security from being pushed downward. While resistance refers to a ceiling that indicates the highest point its price could reach.
Swing Trading
Swing Trading is a strategy to take advantage of short-term patterns. That being said, you will need to focus on the up and down movements of the price.
The thesis of this strategy is that the financial asset’s price will not follow a trend; instead, it will be moving in two directions constantly.
If you want to use this strategy, you will find the selling and buying opportunities within those movements.
Momentum Trading
Momentum trading is a strategy that focuses on finding upward or downwards trends in financial asset prices.
The objective is to find a security that can follow a trend and hold that position. Once a reversal sign appears, it is time to get out of that position.
It is one of the simplest and most effective strategies if you apply it correctly. Make sure to learn about technical analysis and indicators to find your daily trade.
How to Backtest Day Trading Strategies?
Backtesting is a tool included in many simulators, its objective is to prove if a strategy would have worked in the financial markets. By using historical data, you can see how proficient it would have been to apply it.
To begin with, you need to create an account in a simulator. One excellent option is NinjaTrader, their simulator includes a high-performance backtesting engine.
Then, consider the following elements while proving a strategy:
- What is your net profit or loss?
- What are your average earnings and losses for each trade?
- How high or low was the volatility in the market?
- How much capital did you invest per each trade?
- What was the total of your investment in a practice trading day?
- Did you anticipate any of the price movements correctly?
Remember that you should be committed to practicing with a type of strategy for enough time to understand it. Also, focus on learning its key elements, such as news interpretation, technical indicators, or trend patterns.
Backtesting is one of the best tools for Day trading beginners because it will give you a broad vision of how a strategy works and its efficiency.
For better results, check out our Trading Journal article and find a template to record your trading activity.
FAQ
What is the Easiest Day Trading Strategy?
Momentum Trading is a good option for Day Traders beginners, because it requires an understanding of price trends. It is not as complicated as other strategies that require a more agile approach.
Is Day Trading Easy?
Day Trading is not difficult. Is it a trading style that most people can learn, but like any other new ability, it will take time and practice.
To start you need to learn the basics of financial trading. Learning about that will be the foundation for your trading career. Then, you can prove your knowledge by practicing in a simulator, a trading tool to operate the markets using fake money.
And how long will it take you to learn Day Trading? It will depend on your dedication and commitment.
If you are still unsure whether Day Trading is for you, do not hesitate to contact us! We will answer all your doubts!
Can you Make a Living on Day Trading?
Yes, you can! Regarding how much money you can win: it will depend on your capital, experience, and strategy.
At MDC Trading Academy we dedicate ourselves to the mission of developing professional traders who can make a living out of this activity. Subscribe to our newsletter and learn with us!
Manny Cabrera
Stock Market investor since 1990. Professional futures trader since 2008. Finance Specialist and Systems Engineer; he worked for more than nine years on Wall Street. Head Trader and Co-Founder of MDC Capital Group with vast experience mentoring traders. Architect and designer of the MDC methodology. His passion is to transform lives through trading.