subject: Becoming A Successful Day Trader [print this page] When you are doing day trading, you basically buy and sell the stocks within the same trading day. The reason the stocks are sold the same day is to earn huge profits when the stocks that are usually volatile have turned up but have the possibility to go down the following day.
Hence, day trading is not the easiest of tasks to do and requires a lot of financial acumen, knowledge of the stock market movements and behaviors; and a flair for planning and smart thinking. Nevertheless, some standard strategies can be followed which can be helpful in becoming a successful day trader.
Entry Strategies: Identify the stocks that are good and suitable for day trading specifically. Look for stocks that are liquid (that will allow you to get in and go out the market at a decent deal) and volatile (that will allow you to have a wide range of price so that you earn good profits).
Identify Entry Points: You can use three tools in order to identify possible entry points:
1) Level 2 Quotes/ECN: This allows you to watch the orders as they are
2) Real-Time News Service: This allows you to get real time news about stock movements
And
3) Candlestick Charts for Intraday: This provides an analysis of the price action that is raw.
Now, let us look at the following factors:
Candlestick Patterns Dojis and Engulfings
Technical Analysis Triangles and Trendlines
Volume - Decreasing of the volume or increasing of the volume
Other day trading strategies that you can follow are:
Scalping: Scalping is definitely one of day tradings most popular and used strategies, which means selling a stock almost right away after a trade has become profitable. Obviously, here, your price target would be right after profitability is secured.
Fading: This involves the act of shorting of stocks after it had had rapid moves upwards. This has a number of assumptions like (1) the stocks are nearly overbought, (2) all early buyers will be prepared to start picking up profits and (3) all existing buyers can be scared and compelled to quit. Although very risky, this strategy can reap very good rewards. Here, the price of the target will be the time when buyers start to step in once again.
Though the above strategies will help you becoming a successful day trader, the entire trade is fraught with risks and you could incur huge losses at any time. No matter what form it takes (for example, stock trades, stock trading or online trading), the risks will always be there. Hence, you will be required to exercise utmost caution and ensure that at least the capital you invest is protected.
by: Silas Reed
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