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Published On: Tue, Sep 30th, 2014

Day Trading Strategy or How Skilled Traders Beat the Market Repeatedly!

Day trading involves opening positions on an instrument and closing them several times a day. There is higher risk involved, but the ROI is also much higher.

In day trading, a person opens positions on a certain instrument and closes them several times a day. That is why this strategy is also referred to as intra-day trading. When day trading is implemented in a very short-term, it is also referred to as intra-day scalp trading.

Naturally there is higher risk involved, but the return on investment (ROI) is also much higher. In intra-day scalp trading, the basis is technical analysis of important indicators comprising moving averages, momentum oscillators, Fibonacci sequences, chart patterns, etc. Trading stocks often takes minutes, or even shorter intervals. That is why 1-minute and 5-minute frames are most commonly used for technical analysis.

The essence of day trading

In this strategy, most often the same stock is bought and sold on a daily basis. However, the trading activity does not just consist in purchasing equities. It can also involve purchasing and selling options, currencies or futures.The liquidation of positions should be done before market close, in order for aftermarket gaps to be avoided.

Day trading requires a large amount of time in order to achieve success. That is why it is generally done when people do that as a means of earning a living. The key to succeeding is strict adherence to analysis prior to making decisions.

Rules for day trading

The objective of this strategy is making profits on the basis of small price movements in shares or indexes that have high liquidity. When the market is more volatile, the conditions for day trading are better, irrespective of the long-term market trend. The advantage of day trading is that it is not necessary to commit to a position, and only the current conditions should be taken into account.

Day traders should be able to set a time limit for waiting for the specific trading range to develop. Having a preset profit target is also a must, in accordance with the specific equity’s volatility and market conditions. When a position is not profitable after a certain interval of time, it is necessary to close it.

The rules for day trading involve not only the essential knowledge of the equipment, tools and markets, but also the ability for trading on the right platform. The knowledge of which stocks should be traded, when the time for opening and closing of positions comes, is also essential. As part of those essential skills, knowledge of the manner of finding shares characterized by high liquidity and volatility is indispensable, to help for profits generation.

About the Author


- ProfitEase.com is a global financial portal that provides news, analysis, economic calendars, streaming quotes, technical studies and other resources about the global markets. The materials on the website cover a variety of fields including: economics and politics; monetary policy; forex, CFD and derivatives trading; commodity markets; bond markets.

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