Not only do the traders require having a practical approach, but they also need to possess emotional intelligence in pursuance of earning profits from this trade. If you are a novice in this field, then it is imperative for you to get rid of all these myths before you begin to trade. You should not have a false assumption of generating good profits just after a single trade.
On the brighter side, it is also true that you can start earning profits in a considerably short period with intraday trading. However, it would help if you put in efforts for months studying the market with dedication, patience, and perseverance to accomplish that. Now that you have understood the prerequisites of day trading let us move on to the most effective strategies of intraday trading. Before you begin day trading, you should know that it is all about momentum.
Your job is to find these moving stocks before they make a big move and be ready to catch the movement as soon as it is made. In the beginning, it can seem to be a daunting task, but worry not, as there are stock scanners which make your job easier. They help you to find such moving stocks. The Momentum Trading Strategy is mostly effective either at the beginning of the trading hours or during the time of a news spike, which brings humongous volumes of trade. With a high relative volume and a no-close resistance, these stocks, having potential momentum, move above the Moving Averages.
In this strategy, as a trader, your sole focus should be on the stocks with a momentum that is moving significantly in a single direction and high volumes. All in all, trading here is mostly done at a profit loss ratio and it is one of those day trading strategies that can bring upon a quick impact on your profits. In this Intraday Trading Strategies, there are gapers, the securities that portray a gap between the prices on a chart.
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This gap is created when an upward or downward movement in the price is noticed that do not have any trading in between. There are numerous factors due to which these gaps are created, like earnings announcements or changes in the outlook of the analysts.
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The seasoned intraday traders make the most use of these gaps when they occur during the time the exchanges open due to a difference between demand and supply. It is imperative to tap these gaps in pursuance of earning profits before they get filled with the establishment of equilibrium.
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Therefore, using this, traders can make quick small profits with low risks possibilities. In intraday trading, it is always advisable to buy low and sell high to earn decent profits. With the aid of this strategy, you will get an opportunity to enter the security very close to support. You will be able to set the stops with the help of the Reversal Trading Strategy. Here, you take a position on the security that lies very close to the support level. By keeping the bar low and success rates high, the Reversal Trading Strategy provides you with an excellent risk to reward ratio.
Talking of Intraday trading strategies, being accompanied by an increase in volume, break out trading usually indicates when a trader enters the market when the prices move above a specific price range. Traders often use the technical indicator known as Volume Weighted Moving Average in pursuance of understanding and catching these breakouts. However, one has to be significantly fast and aggressive while applying the Break Out Trading Strategy for entries and exits.
You cannot afford to wait for this strategy. Consequently, experienced traders know it in the very instance whether the trade is going to work or not. A short-term move in the security in the opposite direction of a long-term trend is called a pullback. With the aid of a pullback, traders get an opportunity to join the trend without following the security. With the aid of the Pull Back Trading Strategy, you are protected from drowning when you are flowing with the trend. To clarify, the pullback here is different from trend reversal. In this strategy, the strengths are sold, and weaknesses are bought.
Pulling back the securities that are trending provides low-risk buying chances. On the other hand, the securities that are down-trending will move up, which makes way for a low-risk selling opportunity.
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This one is an example of aggressive intraday trading strategies. A bull flag is a situation where you will get to witness a significant price hike that shoots up and reaches its peak and then in an orderly fashion pulls back. In this situation, the highs and lows are almost parallel to each other. There is a systematic and diagonally symmetric pullback after an explosively strong price move that forms the shape of a flag. The Bull Flag Trading Strategy requires much patience for the formation of the flag and then the upper and lower trend lines formation.
Two spots, one of flag break and the other on the break of the high are marked which form the two entry spots into the trade. Furthermore, there are numerous technical indicators such as the Bollinger Bands or Stochastic Oscillator to derive the target prices in a bull flag pattern.
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It is generally a price crossover strategy where when the security prices go above or below a moving average, and then a potential change in the trend is indicated. By eliminating all emotions, this strategy shows the shift in momentum when the security prices cross over from one side to the other of the moving average. It is to be noted that a crossover above the moving average shows an uptrend and a crossover below the moving average indicates a downtrend. It is always advisable in the field of intraday trading that one should not enter a day trade without a stop loss.
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You might be aware of the requirement of stop losses in some of the other trades, but when it comes to intraday trading, stop losses become a mandate. It is said, not to become an investor by default; rather stay a day trader by design. It is often observed that in the absence of stop losses, traders often end up holding positions with unmanageable M2M losses.
The overall technical and fundamental setup does not have a major bearing on this trade. Price action plays a very important role while selecting the trade for scalping. The stocks or commodities chosen for purpose of scalping should be liquid and volatile. And one important thing to always keep in mind is to have a stop loss for every trade. One should not let the position drift away. The scalping strategy is best suited when the market is stuck in a tight range.
Liquidity and tighter range are two friends of scalpers. Img 3: 15 Mins chart of TCS source: www. If we look at the image above, the market is stuck in a tight range and it provides a great opportunity for scalpers. This Strategy can also be called as the moving average crossover strategy. This is generally a trend reversal strategy in the market. When the price of the underlying asset goes above or below the moving average, it generally signals a change of momentum in the market.
When the crossover happens from bottom to top, it is called Bullish crossover and when the crossover happens from top to bottom, it is called a Bearish crossover. And when the market starts trading over the moving average, the dips are being bought back in the market. Therefore, when the market is trading over MA, it is advised to go long and when the market is trading below MA, it is recommended to initiate a sell position.
In this article, we covered the four best Intraday Trading Strategies for beginners. Here are a few key takeaways from this post:. I hope it was useful for you.
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