Day traders attempts to make profits by leveraging large amounts of capital to take advantage of small price movements in highly liquid stocks. There are 4 common day trading strategies by which traders attempt to make a profit: Trend following, Playing news, Range Trading, and Scalping.
Trend Following
This is the simplest and safest method of stock trading. It assumes that stocks which have been rising steadily will to continue to rise, and vice versa. The trend follower buys a stock which has been rising or short-sells a falling one, in the expectation that the trend will continue.
Playing News
The strategy to this is to buy a stock which has just announced goods news, or short sell on bad news. Such news will cause huge volatility in a stock, meaning a good opportunity for quick profits (or losses). Something a typical day trader would look for when picking their stocks.
Range Trading
A stock is said to be “trading in range†when every time a stock hits a high and then falls back to the low, and vice versa. This pattern goes on a continuous basis. The range trader therefore buys the stock at or near the low price, and sells at the high.
Scalping
Also known as spread trading. Scalping is a trading style which arbitrage for small price gaps created by the bid-ask spread. It normally involves establishing and liquidating a position quickly, usually within minutes to even seconds.
0 Responses to “Day Trading Strategies”