Inside The Notes Of A Successful Day Trader — Part 1

There might not be the best day trading strategy for beginners as the markets keep the constant flow of changes in price actions. Yet, profitable frameworks have common features and are built on the solid foundation of basic steps. Please scroll down the notes that a successful day trader keeps to maintain his wins.

What To Buy

Before any step and even before starting your first trades, it is crucial to identify the underlying assets for your bet. There is a wide variety of assets, such as stocks, currencies, futures, and options. So, which standards alleviate the difficulty of the selection process?

This section highlights three critical elements to choose potential and profitable stocks, including

• Liquidity refers to how easily you can buy or sell an asset at a favored price. Thus, it is an advantage if you find high-liquidity stocks. It is a nice combination of liquidity with tight spreads, the difference between the stock price of bid and asks, slow slippage, etc.
• Volatility indicates the daily price range or price fluctuations within a trading day. There is a correlation between volatility and potential profits or losses. It means that the more volatile the stocks show, the higher profits or losses you will end up with.
• Trading volume measures how many times people buy or sell a stock in a particular period. People also call it the average daily trading volume which you should know if you are a day trader. The higher the trading volume is, the more interest a stock gain, which might lead to the next ups or downs of its price!

These are what you should look at before deciding what to buy for your day trades. Of course, there are still other elements, yet the three aspects above are the most fundamental to picking profitable stocks for your trading portfolio!

When To Buy

Our previous article already mentioned the role of timing skills to get opportune timing for phenomenal profits and low risks. After determining what to buy, it is time to determine entry points for your trades.

Between technical analysis and fundamental analysis, day traders need the insights from technical analysis more. Simply, it shows much more real-time updates of current market statuses for timely actions. You can find more details in our Day Trading vs. Investing: Which Is Better?

Besides insights from technical analysis, you can also get the support of powerful tools. They can help you confirm the direction of price movements for more accurate market forecasts.

• Real-time news services, as the name suggests, help you update the financial news that profoundly creates downtrends or uptrends. Being updated on the markets is among the factors for your trading success.
• ECN/Level 2 quotes stand for Electronic Communication Networks displaying the most optimal bid and ask quotes by various market participants. Then, the execution of matching orders will be automatically processed. Besides, level 2 refers to the provision of real-time access to the Nasdaq order book.
• Intraday Candlestick Charts show a raw analysis of price action. It is among the classic techniques that still work in modern trading markets.

A common conception is buying when an uptrend happens, which sounds right but not enough. You need more details than just the signals of uptrends. Specifically, when the upper trendline of a triangle pattern is below the price, it is time to buy stocks.

The key is to develop entry rules in combination with enhanced chart reading skills. Using the tools that we recommend above can also take off workloads and the pressure of accuracy from your shoulder!

When To Sell

Once you master how to enter the market or start a trade, you should learn to exit the market with the most gains and the least losses. In other words, it is crucial to update techniques and strategies to exit a winning position.

There are two most common approaches related to exit points — trailing stops and profit targets. The following content covers popular strategies of the profit target method to bail out from your trades or the markets without bitterness in your mouth for losses.

• Scalping has won many traders’ hearts as it indicates the immediate selling when the trade becomes profitable. In this case, the price target is any plus figure you gain as profits in your account no matter how small or big it is.
• Fading is to short stocks after the market rapidly moves upward. Despite high-risk exposure, it is ideal for risk-takers. The reward is high returns if you collect valuable insights into the market, and price actions, and have the guts to follow your plans! So, the price target marks the time when buyers step into the market again. There are some possible scenarios when a day trader uses fading strategies.
• People have overbought the stocks that you lay your eyes on.
• Early buyers will be more than willing to earn profits.
• Existing buyers will be threatened by the possibility of increasing prices.
• Daily Pivots, as the name suggests, refer to the profits from the daily market volatility. More specifically, the low of the day is a signal for buying while the high of the day urges you to sell. In this case, the price target is at the transaction into a reversal.
• Momentum relates to day trading on news releases or spotting dominant trending moves that have attracted high volumes. The holding period will last until the trader sees the signal of reversals while you can apply momentum strategies in the fading price surge. So, the price target is at the start of decreasing price!

We hope that you can find the process of developing the best day trading strategy for beginners easier through the pillars in this article. It is the first of our intensive series about day trading tips and effective strategies. So, you can develop powerful frameworks for higher earnings while undertaking the lowest risks!