Day Trading Strategies

Only an immortal trader would be able to accurately predict the sway of the stock market and win every trade. Since this is highly unlikely, we are left to rely upon our experience, knowledge, risk management assessment, and strategies of various trading styles to survive and prosper in an ever-changing, unpredictable market. While consistency is very important to succeed in the stock market, it is just as detrimental to be flexible. Think of a tree with deep roots that is so stiff and solid during a howling wind that its trunk is unbending and snaps from the intense pressure. However, a small weed with roots will easily bend to the wind. The difference is that it doesn’t snap, it isn’t uprooted, and it’s still there in the end. The goal is to develop a systematic trading style that works for your needs, meets your personal expectations, and brings about success as you define it.nnThe three basic styles are scalp, swing and core trading. While all three of these trading systems have consistent elements and characteristics that identify them, their core ideological structures goes very deep and beyond the basics. Even though you are likely to develop a particular style that you prefer, a good, solid education on all trading styles with the ability to use them interchangeably as needed brings an overall approach to stock trading.nnScalp TradingnnScalp trading is a way of profiting from price fluctuations in the stock market. These trades are usually fast and sometimes difficult to judge, lasting from seconds to mere minutes with only 0.125 to 0.5 point gains. When just beginning, trade with small shares to reduce the cost of learning as you gain experience. Think of it as baby steps. Most people that put on skis for the first time, wouldn’t likely climb the highest mountain in Denver, Colorado before at least attempting a few beginner slopes. Find a few your beginner trades before you jump into to the market full force with challenging profits in mind.nnThis kind of adventure requires gaining experience the old-fashioned way through trial and error. Due to the quick time frame of scalping, there are various levels of risk-rewards ratios and strategies used. The best scalp traders have trained themselves to think quickly on their feet and to place numerous orders like second nature. Hesitation is always a risky cost in the stock market, but even more so when scalp trading.nnBefore you even begin a scalp trade, do your research on what’s happening in the market. Once you’ve narrowed the market down to a few possible targets, check the daily chart for resistance levels. If it’s only ¼ to one point away, abandon this target and find another one. You want a target trade with more leeway than that. Remember that you are looking for opportunities with low risk and high earning probabilities. A trade already near the resistance point greatly decreases your profitability. By now you realized that charting is very important and necessary to determine your trades, market trends and what steps you want to take next. You must have access and take the time to review the entire chart so that you can see exactly how the up-to-minute trades are affecting the stock.nnBe sure to check out the following issues:nn· Today’s highs and lowsnn· Yesterday’s highs and lowsnn· Gaps from yesterday’s closing price to today’s opening pricenn· Include yesterday’s critical pivot areasnnWhen scalp trading, only risk as much as 0.125 spread or less. This reduces your risk, especially if you are inexperienced or uncertain of where the stock is heading. Such trading strategy is designed to win a fast profit and exit quickly. It’s very necessary to capitalize on breakouts and breakdowns while they are in full momentum. Scalping is an attractive trade to many because the risks are smaller. While this may seem logical and cautious, scalp trades happen very quickly and add up during the day. These small risks in multiple numbers turn into huge losses once they are calculated into one large lump sum.nnThere are a few strategies to consider when setting up a scalp trade. Try your best to consolidate near the day’s high. This may not be possible early in the morning, but toward the afternoon as market fluctuations occur, good spikes appear on the charts, ripe for scalping profits. As the stock moves, you should follow sideways in a steadfast manner. You have the option of buying on the breakout point at 0.125 point above resistance, which is probably easier. Your other choice is to buy right before the breakout, but this step is more difficult and requires precise timing. If you are too early, you risk the possibility of the stock reversing. One guaranteed strategy would be to buy only half your planned lot size before the breakout, and the other half at the breakout moment. When you make a profit, you can sell the first half. If possible, allow the other half to rise one or two levels higher. This way you covered either way.