Day trading: Strategies and risks
Day trading is a type of investing that involves buying and selling stocks, ETF’s or other financial instruments within the same day. Day traders used to be professional traders at banks/investment firms but now with electronic trading it has become increasingly popular among individual investors as well! Because at the end of the day, the question you’re really asking is Can I Earn a Living Trading Stocks?
Day trading is a time-consuming and stressful hobby. The odds aren’t in your favor; most nonprofessional traders who try it over the long term are unsuccessful due to lack of discipline, dedication or strict money management controls that allow them enough space for error.
Day Trading can be profitable if done correctly however with high risks associated (both financially & emotionally/mentally).
Day traders use a variety of strategies. Most common among them is time-compressed, traditional technical trading like trend following and range trading with some focusing more on scalping or rebate trades for small profits in large numbers over short periods; we will focus this article around these more conventional approaches to day-trading instead!
Here are a few common day trading strategies:
1) Breakout trading
Day traders try to identify stocks that show signs of breaking out from a previous range, and then get in on the action. They will often hold their positions for just a few minutes or even seconds before taking their gains. Day traders who employ breakouts typically look for factors such as volume and price movement and place stop-losses close to support levels. This strategy is best for low-volatility stocks especially when combined with a high volume breakout , or at least this was the case before all hell broke loose in October! Day traders usually don’t hold positions overnight because of the increased volatility and higher-than-normal margin requirements that go along with such strategies, making risk control even more important. Day traders look for a minimum of five to 10 percent profits per trade. Day traders can use this strategy in both trending and choppy/sideways type market conditions.
2) Scalping
Scalping is a strategy where day trader looks for small gains from a large number of trades. Day traders that employ scalping will typically hold a position for a few minutes or even seconds before taking profits. Day traders look for a minimum of five to 10 percent per trade, with some looking for much more modest gains. Day trading the Nasdaq-100 ETF QQQ at key support/resistance levels can be an effective way to scalp on low volatility days, however it’s important to note that this strategy comes with high risk, and is considered unsuitable for most traders not just Daytraders! Day trading the Nasdaq-100 ETF (QQQ) requires a significant amount of cash in your account due to higher-than-average margin requirements.
3) Day trade the news
This day trading strategy involves buying or shorting a security after key market-moving news comes out. Day traders who use this strategy will try to profit from the volatility that often follows major announcements, such as an interest rate decision by the Federal Reserve. Day traders usually hold their positions for just a few minutes or even seconds before taking profits — or losses! Day trading on the news requires a significant amount of cash in your account due to the high margin requirements that go along with such strategies. Day traders can use this strategy in both trending and choppy/sideways market conditions. Day trading on the news is easy to follow but you need big pockets!
4) Day trade round-turns
This day trading strategy is a blend of the day trading range breakout and the day trade the news strategies. Day traders who use this approach will buy or sell after key market-moving news comes out, then hold their positions for a few minutes or even seconds before taking profits — or losses! Day trading round-turns requires a significant amount of cash in your account due to high margin requirements that go along with such strategies. Day traders can use this strategy in both trending and choppy/sideways market conditions. Day trading round-turns is easy to follow but you need big pockets!
For more information visit:
https://theministerofcapitalism.com/blog/can-i-earn-a-living-trading-stocks/
https://www.youtube.com/watch?v=x0PjV5lp5g0
