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Day trading strategies cover the technique of trading in markets that are limited to one trading day. Thus, a day trader is someone who engages in trades during a given time frame. They will get in and out of positions without carrying them overnight to profit from the immediate movement before the market closes.
Sounds simple enough, right?
The aim is to identify an opportunity, so knowledge of the market and how to read a chart is paramount. A successful day trader will have a deep understanding of the market and will be able to identify the best time to enter and exit a trade. While it can be profitable, it also involves risk for new traders.
The Fundamentals of Intraday Trading
Intraday trading, or trades occurring within one day, focuses solely on the movement of an asset during regular business hours while disregarding its future development or prospect for growth. Day traders will trade in any market that has enough liquidity to provide the asset with some intraday momentum that could result in a quick trade.
Day Trading Strategies for Beginners
Knowledge is key. A successful day trader is aware of the latest global news and its effects on the stock market. Do your research and read up on trading blogs. If day trading is something that you want to master, test your strategies on a Demo Account first. Be prepared to devote time to it every day. Day trading requires you to be present to assess the market’s movements, and speed is required to enter or exit a position to ensure profitability.
When is the Best Time to Enter a Trade in Forex?
Experienced day traders will begin as soon as the market opens, between 8 am and 12 pm to ensure the overlap of the US and UK exchanges. More than 50% of Forex trades happen during this timeframe. In addition, you can count on an active market mid-week, Tuesdays through Thursdays, due to the higher volatility. The markets on Mondays tend to be stable, and beginners may want to avoid Friday trades as they tend to be more erratic.
Can Anyone be a Day Trader?
Technically, yes, but in the same vein, anyone could play in the NFL. Without experience and practice, it can carry high risks. A day trader is usually someone with a few years of experience and a strong understanding of the financial market. While some people are successful part-time day traders, most successful day traders work full time in front of multiple monitors and are highly disciplined.
What do Day Traders Trade?
Day trading strategies are commonly applied to currencies, both forex and crypto, equities, and commodities since they have the largest pools of liquidity. Also, these markets are quick to react within a day.
Is Chart Analysis Essential for Day Trading?
Day traders will employ both technical and fundamental chart analysis. It seeks charting on the lower intraday time frames that can forecast the short-term market moves. Technical analysis in day trading is essential, as it serves to indicate entry and exit points if the market is, for example, moving in a range. It is also heavily influenced by news and events that can affect a market and cause it to move more rapidly in either direction.
Day trading on fundamentals can include trading news, press conferences, corporate earnings reports, and almost all news and events to which a given market or an asset may react in a single day.
What are the Risks Involved with Day Trading Strategies?
Buying assets and selling them on the same day involves higher risks than other trading strategies. Day trading is perhaps the most disputed topic among trading strategies. In volatile markets, the moves are sometimes extreme. If a trader has used a significant margin, they may end up needing to provide additional cash (maintenance margin) if they don’t have enough funds in their account to secure the downside. However, with the right amount of experience, discipline, and sound risk management, some traders argue there are good opportunities to make a profit.
By ending each day flat, which is what day trading implies, traders do not care what the market will do in a week or how much a stock will be worth tomorrow. This type of trading removes the risk of being wiped out from the markets by an unforeseen event that could happen while the trader is away.
For a trader to have an edge in day trading, they must design a way to approach the market day in and day out. And if a trader does indeed find a profitable day trading strategy, they must have the discipline to follow through with it and stick to it. Trading intraday without understanding market moves and sentiment can result in significant losses, so a trader must be aware of the market dynamics and the forces that stand behind it.
Is Day Trading right for you?
Choosing to become a day trader isn’t something to be taken lightly. It takes time, knowledge, patience, and money! Some currencies, especially the crypto market, are very sensitive to global news and can change dramatically in either direction. Add that to margin trading, and both profits and losses are amplified. So, do your research, read up on the news, and with practice, you may be one of the day traders who succeeds!
OspreyFX is the perfect partner to guide you on your trading journey. Why not take advantage of our free Forex Trading Education Tools, and utilize our indicators to help you read the charts! Our traders can also trade with better insight thanks to our Forex Calculators. Why wait?