Intra Day Trader Day Trading Strategies

photo thanks wikipediaDay traders buy and sell stocks intra-day, or during the trading day. Ideally, they want to have all transactions concluded by the end of the business day. If trades are not completed and sit overnight, there is a greater risk for significant losses. There are many strategies you can use to improve your chances of success in the stock market.

Scalping

Scalping style day trading strategies are those that involves quick buying and selling of stocks at a small profit margin. In order for this to be effective you must trade in high volumes as well. These transactions can last from a few seconds to a few minutes or more.

Momentum

The momentum trading strategy is dependent upon current news and events. News can send stocks up or down. Day traders who use this strategy constantly watch for new trends in the market based on the news reports coming out and buy or sell accordingly.
Depending on the event taking place, a stock’s price will trend upward or downward. Day traders have to be alert and conscious of everything taking place in the world around them. Keeping up with financial, national and world news consistently is the best way to succeed with the momentum strategy.

Contrarian Trading

Traders using this method rely on the inherent instability of the stock market. Using the contrarian method, day traders make transactions based on the thought that “what goes up, must come down”. They bet on the rise of stocks that have steadily fallen, or the fall of those that have steadily risen, to change direction and trade accordingly.

Trend Trading

The best way to describe the trend trading strategy is that day traders “Ride the Wave” of stocks. They basically rely on the ups and downs of the market to turn a profit. By analyzing stock trends and movement, they can predict which way the market will go; however, they do not try to predict the dollar amounts and instead ride it out until the trend breaks.

Risks of Day Trading

Day trading is a high stress job. Very few people have the resources to do it full time without losing everything. They have to know the risks before they get into the market and how to handle themselves in a fast paced and volatile environment.

Financial losses are not just a possibility, they are guaranteed. Traders have to know exactly how much they can afford to lose.
Gaining extra money through outside loans like a second mortgage is not acceptable. If they do this, they are playing stocks against their family’s stability.

It takes a great deal of concentration on the part of day traders to watch market trends.

Day traders have to know exactly what their expenses are. They cannot just walk onto the floor and start trading. Paying for computers, training and commissions figure into total costs.

Keep a Strict Set of Rules

Day traders who do not have rules of conduct for themselves are the most likely to fail. Adding to that risk are false claims and advertisements that guarantee fast money. They have to be smart and ask questions about their firm’s clients and how many have lost money. Suggested rules to employ are:
Figure out the maximum financial loss they can handle both fiscally and emotionally.

Put in a physical stop-loss order so they cannot lose more than a certain amount.

Use a mental stop-loss strategy and use self-discipline to stick to those numbers.

Always have more than one exit strategy.

Playing the stock market as a day trader is a fast paced, high stress job. Traders must use all the tools available to make the best decisions they can about their investments. Day traders must also know when to stop.

Following some of these rules may just help you through the dangerous waters of high frequency trading

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