Strategies in day trading – an Introduction
As the term suggests, day trading refers to trading in the stock market over the span of a day. This is significant in the fact that the trade can start at the beginning of the market day, and has to be completed before the closure of the trading day. The strategies that are employed in day trading are entirely different from that used in regular trading, and let us further understand it better. Here is an introduction to making money with strategies in day trading and Admiral markets.
Types of stocks that is suitable for day trading
The normal way in which stocks operate is such that the changes are less visible in a single day, but the price may rise or fall over a consecutive number of days. For this reason, a trader will often buy a stock and keep it with him till the market value for it goes above a certain amount, and he will then sell it off to obtain the difference in price as the profit. In this case, the amount invested in a single stock may be sufficiently low, as it is likely that the change in value will be significant over time.
In the case of day trading, the candidates for purchase are different. You need to find stocks that are more volatile in nature and undergo fluctuations in the market price significantly over the course of the day. Only then can you sell or buy it when there is a difference in the price. Also, since the changes are not too drastic, you will have to invest a larger amount in a single stock to gain a substantial profit. This can also increase your risk, should the value nosedive instead of increase.
Targets and selling style
The way a trader operates in the market will depend on his personal trading style. Not everyone is equally inclined to take risks, and wait for a stock to go to the highest possible rate. The ones who want to bank on a profit at a safe level prefer the style of scalping. Here they sell off their stocks soon after the price increases, without waiting to see if it will go further and reach a higher price.
A riskier approach is fading. Here, an Admiral markets trader begins to short stocks, as soon as the price rises upwards. The trader has to keep track of how the market performance for the stock is. Unlike scalping, where the price is the only determining factor, in fading the trader also tracks how other buyers are responding to the stock price change, and will accordingly make his sale. If it is done properly, the profits are high and significant in this style. However, a good understanding of how the market works, and predicting it appropriately is required, and this method is suggested only after you’ve been trading in the market for a while.
A simple and straightforward strategy is to pivot your sale or purchase based on the stock’s highest and lowest price at a day. To put it simply, you buy the stock at its all-time low of the day and sell it when it touches the all-time high. Continuously monitoring the market becomes necessary to make sure your sale goes through at the right time.
More and more people today are turning towards the momentum strategy, where they base their decision to buy or sell a stock based on what the news reports and trends suggest it. Here, the target is dependent on whether a stock is predicted to rise or fall by market analysts and experts. There is a risk, as there is no guarantee of whether this will be right or wrong. However, following the Day Trading Strategies is always benefitting.
Dividing your risks
As with any trade, it is recommended that when you involve in day-trading, you diversify your portfolio. Investing all your money in a single or selected group increases your risk, should the trade go in the opposite direction. Rather than take this risk, it is suggested that you invest smaller amounts in a range of stock options, so your losses are covered, should it occur. So, what are you waiting for? Follow the strategies and you will be surely benefitting.
Timing is everything in stock trading
When to enter and when to exit in stock trading?
Breakout is one of the right phases for both entry and exit. Breakout is when stock prices rise a little over two or more percent or when demand far exceeds supply. Avoid risking taking decisions of buying and selling stocks in conditions like lower sales, new legal problem faced by the company, bear market, certain situations affecting the earnings of the company which affects its position and pace in the market, etc.
Selling stocks is as important as buying the right stocks
Analyzing the growth of the stocks is important and when the growth is constant it is better to take a call as once it starts again there might either be decrease or increase in its value. Dividends are a clear indicator for selling stocks especially when the company is either reducing the dividend or stopping it completely because this is a sign indicating towards loss which means selling will save you from incurring a loss.
Whenever the value of stocks drops by 7 or 8% from its original buying price it is an indicator that you will have a great loss if you stick on to it. Selling away such stocks is the right move to avoid further loss. When the stocks move up to 20 to 25% their value then sell them to incur profit and reinvest in other stocks before the value drops down. Hoping for an increase above that may prevent you from selling it for which you can retain some of the stock and sell the remaining to have a good gain. Selling stocks is as important as buying stocks because the profit in stocks is always on the papers which if needed to be cashed require you to sell them when the value is high. If you are a novice in stock trading; then it is always a good idea to follow the Trading Tips.