Every trading day is always different. There’s not such a thing that two days in the market are exactly alike. However, there are still patterns that occur over and over as they’re hidden beneath the random daily price movements. This is where day trading strategies come in.
Day trading is the buying and selling of a financial security on the same day, or multiple times in a day. It involves in taking advantage of small price moves. Usually, all positions are closed before the market session ends.
Read more: Beginner’s Guide to Day Trading.
Traders who use day trading pick a trade at the beginning of the day. They would act on their bias, then finish the day with either a profit or a loss. In addition, they never hold their traders overnight.
Day Trading is suited for forex traders. If you have enough time throughout the day to analyze, execute, and monitor a trade, then day trading might be for you.
Read more: What is forex and you should know about it.
Here the three effective day trading strategies in forex.
One of the most effective day trading strategies is trend trading. It involves looking at a longer time frame chart, and finding an overall trend.
When the overall trend is set up, you move to a smaller time frame chart. Then, look for trading opportunities in the direction of that trend.
Find out more about the Underlying Principles of Trend Trading.
Further, you can use indicators on the shorter time frame chart. This will give you an idea when to time your entries in positions.
Counter Trend Trading
Counter trend trading is also known us pull back trading, reverse trading, and fading. It’s one of the worst day trading strategies, especially for inexperienced traders.
This is similar to trend trading. However, once you find the overall trend, you look for trades in the opposite direction. The goal here is to determine the end of a trend, and jump in early as soon as the trend reverses. It’s among the day trading strategies that is a bit riskier, but can generate huge profits.
A reverse trader has to determine potential pullbacks with a high probability, and to be able to predict their strength. Further, this strategy requires a lot of market knowledge and practice.
On the other hand, you can consider the Daily Pivot strategy as a special case of reverse trading strategy. It specializes in trading the daily low and daily high pullbacks and reverse.
Breakout day trading is about looking at the range a pair has made during certain hours of the day. After that, place trades on either side, hoping to catch a breakout in either direction.
This is most effective when a currency pair has been in a tight range. This is an indication that the pair is about to make a big move.
In this day trading strategy, you determine a range where support and resistance have been holding strongly. After this, you can set entry points above and below your breakout levels.
The general rule here is that you want to get the same amount of pips that makes up your determined range.
Read more: The basics of support and resistance indicators.
This kind of trading is considered to be one of the most challenging styles of trading. This is why it’s important to jumpstart your career with day trading strategies.
Moreover, there are more day trading strategies out there you could try. While it’s not a secret that day trading is difficult to master, it still can provide huge rewards. If you have the time, skill, and discipline, you can significantly improve your chances of becoming a successful forex trader.
You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!