I often get asked by traders who are quite new in trading what are the Day trading strategies that they can use to make profits. What’s the reason behind this question? The reason is that a good trading strategy is one of the most important prerequisites for being successful with day trading.
So, finally, I decided to come up here and share with you: what Day strategies you can adopt if you’re a beginner along with their features so that you can pick a strategy based on your specific situation.
So, Why wait? Let’s jump in.
List of the 3 best day trading strategies for beginners
The so-called scalping is also often referred to as a day trading strategy, but strictly speaking it is more of a goal that traders pursue with day trading. What is characteristic of scalping is that, on the one hand, very high volumes are traded, and on the other hand, with the aim of profiting from even small price changes. The consequence of this is, among other things, that only a few minutes or even just a few seconds pass between buying and selling when scalping.
Accordingly, based on this trading strategy, you will typically need to execute a series of trades within a day. It is not uncommon for the respective profit to be less than ten pips, for example, if you use your day trading strategy for Forex trading.
In short, the scalping day trading strategy is characterized by the following features:
- High volume trading
- Relatively low profits per trade
- The time between buying and selling is often just a few seconds to a few minutes
- Exploiting the smallest fluctuations
This strategy is generally very suitable for day trading. However, you should not use this strategy on all markets and with every financial product that you can trade. The reason is that the relevant markets for this strategy must meet certain requirements, in particular:
- Relatively high volatility
- Sufficient liquidity
- Fast order execution possible
2- Break-out strategy
Break-Out translated from English means to break out. The break-out strategy is based on stronger movements in the markets. The basis for comparatively strong market conditions is often, on the one hand, price accumulations and, on the other hand, news or press releases that cause major price changes and reactions.
Ideally, day traders use the break-out strategy to build positions at the exact moment the price movement is just beginning. If the expected breakout actually occurs, it can lead to higher profits in trading in a very short period of time.
The break-out strategy works on the principle that at certain price points of an underlying asset to be traded, there is a high probability that there could be larger movements.
The following points are particularly typical:
- Resistances or resistance lines
- Supports and support lines
- Trend confirmation points
- Historic lows
- Historical highs
For example, if a price breaks through a previous resistance line, this more often means that there is a larger breakout upwards, i.e. the price rises (significantly). The break-out strategy works exactly with this assumption.
One of the interesting day trading tricks is how you can recognize as quickly as possible when such a breakout could take place. However, this means that the break-out strategy can also be suitable for beginners, but even more so for traders with experience.
Implementation of the breakout strategy
The reason that quite a few beginners use this trading strategy is mainly due to the fact that the day trading strategy can be implemented relatively easily. This is due to the easily recognizable price values, where there are, for example, resistance or support lines.
It is optimal if you implement the trading strategy with a take profit and a stop loss order. Since the possible price gains can be relatively high in a short period of time, with this strategy you have to carry out significantly fewer trades per day than is the case with scalping, for example.
Break-out strategy is characterized by the following properties:
- Based on strong market movements
- Price movements are often caused by news and press releases
- Distinctive price values must be identified
- Frequently working with a take-profit and stop-loss order
- Suitable for beginners and advanced users
3- News Trading
An almost fundamentally oriented day trading strategy is so-called news trading. In this case, trading takes place on the basis of events that are in turn published in the media. This is always news that includes, for example, the following form:
- Business News
- Industry news
- Ad hoc announcements from the company
- Business figures
- Other news
It is primarily about news that can also impact the company behind the underlying asset being treated. A classic example would be the ad hoc announcement by a stock corporation that, for example, there is a takeover offer.
Not all news, but some, for example, share prices react with a stronger breakout. The overall market can be influenced by news, such as political developments and crises that suddenly appear.
Significant price changes are the basis for news trading. The task of the strategy is to recognize such possible outbreaks. As a day trader, you then have the task of positioning yourself in the direction in which the prices are likely to take.
A basic requirement for the strategy to work is to act quickly. If the news is already a few hours or sometimes even just minutes old, the outbreak may already be a thing of the past and you will therefore be late.
For this reason, when it comes to news trading, it is crucial to always be up to date as soon as possible. It is therefore helpful to use different media, such as:
- News feeds
You just need to correctly interpret the news in terms of where prices might be moving. Speed is important, but it is not a complex strategy.
Regardless of whether you use many of the well-known day trading strategies or design your own trading strategy: a functional strategy is essential for profitable trading within a day!
However, it would be fatal if you only acted based on your gut feeling. A good trading strategy will protect you from bad decisions caused by feelings such as greed or panic.