If
you want to be a successful day trader, it's crucial to know the most
effective day trading strategies. Every day trader has at least a few
favorite strategies that he falls back on again and again. What works
for one person may not work for another, though, so it pays to learn as
many as possible in the beginning.
Basic Day Trading Strategies
There
are a few basic rules that will help you achieve ongoing success as a
day trader. They apply to all day trading strategies. The most important
one is to not allow yourself to be ruled by emotion. Emotions have no
place in any successful day trading strategy. So-called gut reactions
only lead to trouble.
One of the reasons that
emotions are bad news for day traders is that they can make you deviate
from your chosen strategy. This brings us to our second rule, which is
to stick with your game plan. No matter which strategy you are
following, you need to see it through. Persistence is key.
Finally,
you must be able to recognize and understand trading indicators.
Otherwise, it is impossible to achieve success with any of the most
effective strategies.
The Best Strategies for Day Traders
There are dozens of day trading strategies. Avoid becoming overwhelmed by learning these four basic strategies first:
- News Trading - When a major news event occurs that affects the stock market, savvy day traders spring into action. Using this strategy is as simple as keeping up to date with current news stories and moving quickly to buy or sell as needed.
- Range Trading - This is where in-depth research and patience really pay off. Learn the normal high and low range of a specific stock and always trade within it.
- Pairs Trading - As the name implies, this strategy involves trading in pairs. Choose a category, and then go short on a weak stock and long on a strong one. By making these trades simultaneously, you dramatically increase your odds of achieving remarkable profits.
- Contrarian Trading - Despite what the current momentum of a stock suggests, this strategy requires you to trade against it. Many beginning day traders struggle with this strategy, but more seasoned traders know that it's a terrific way to make some serious money.
As you gain
more experience as a day trader, you'll get to know additional
strategies, including variations on the ones highlighted above. Before
too long, you'll have a selection of strategies that will help you
achieve long-term success as a day trader.
