What Is The Best Day Trading Strategy

Day trading is skyrocketing in popularity as more and more people are looking for financial freedom and the ability to live life on their own terms. A skilled day trader can make great profits trading Forex, but for forex trading beginners, day trading can be extremely dangerous.

Day trading is difficult to master. It requires time, skill, and discipline. In this article, we will list some techniques and strategies to help you conduct a profitable day trading.

What Is Forex Day Trading

Day trading is one of the styles of forex trading strategies, in which traders open and close positions on the same day. Day trading strategies tend to be more action packed and require traders to be present at their trading station throughout the session, monitoring the live price charts.

Day trading is also one of the most sought after (and one with maximum volume) form trading amongst traders in the market. With proper analysis and execution, it has the potential of generating very handsome returns.

And while fast-paced trading isn’t suitable for everyone, there are definitely plenty of advantages of intraday trading:

1. Avoid Swaps

One of the main reasons for day trading, apart from fast results, is avoiding swaps — nightly interest fees charged by the broker as compensation for carrying a position overnight. As, the trader has to close the position prior to the end of trading day, ensuring that the profitability remains unaltered by the events or movements that happen during this period.

2. Avoid Being Affected by Negative Overnight News

One of the most significant benefit of intraday trading is that positions are not affected by the possibility of negative overnight news that has the potential to impact the price of securities materially, including vital economic and earnings reports, as well as broker upgrades and downgrades that occur either before the market opens or after the market closes.

3. Reduce Trading Burden

Day traders can easily combine full-time jobs and profitable trading sessions, without having to constantly worry about the market. Day traders can make quick and faster money as they don’t have to wait long durations for their profits.

Psychologically, closing profits (or losses) daily makes you feel relaxed as you do not have to worry about what’s going on in the market after you have left your desk.

What Is The Best Forex Intraday Trading Strategy

1. News Trading Strategy

News based trading is one of the most common types of day trading. Traders involved in this type don’t concentrate on the volume chart and stock price; instead, they wait until the information arrives to drive prices.

Investors using this strategy will buy when good news is announced or short sell when there's bad news. This can lead to greater volatility, which can lead to higher profits or losses.

2. Trend Trading Strategy

In trend trading, intraday traders famously approach the market with a daily pivot. They focus on trading pairs at high pullbacks or daily lows. Traders look for currencies priced at extreme highs or extreme lows, having a great potential of snapping back abruptly. The trade becomes highly profitable as soon as the price trend reverses. By investing against the trend, they can acquire short or long positions for making profits from the price movement.

3. Breakout Trading Strategy

Breakout trading strategy is one of the most commonly used day trading strategies that involve identifying times when the stock price rises above or falls below specified levels with an increase in the trading volume.

If the breakout is on the upside, then we go long and if the breakout is on the downside, then we go short. One should always mark the supports and resistances, so as to have right stop losses for the breakout trades.

4. Momentum Trading Strategy

As the name suggests, the whole premise of this strategy is to catch the momentum in the market. To gain success in day trading of currencies, traders can find viable opportunities in pairs with momentum. They can invest in currency pairs that move between 20% and 30%.

The momentum trading strategy is effective only when the day begins. In day trading, some traders can use it based on the market news when a sudden increase or decrease in price movements is reported.

5. Moving Average Strategy

Also called average crossover strategy, this strategy is generally a trend reversal strategy in the market. When the price of the underlying asset goes above or below the moving average, it generally signals a change of momentum in the market. When the crossover happens from bottom to top, it is called Bullish crossover and when the crossover happens from top to bottom, it is called a Bearish crossover.

Therefore, when the market is trading over MA, it is advised to go long and when the market is trading below MA, it is recommended to initiate a sell position.

Conclusion

While implementing the above intraday trading strategies, a day trader is likely to face some challenges. These challenges can impact the efficiency of these day trading strategies and affect the profits made from trading currencies.

Day trading tends to suit attentive individuals capable of managing the stress of intense risk-taking activity. Successful day traders will typically be more experienced market operators who have traded for several years and have the right personality type to deal calmly and objectively with the volatility often seen in the financial markets.

Remember, day trading requires an understanding of the markets and awareness of the trends and external events causing any change in trends. While strategies can help make sense of the markets, most traders use them interchangeably based on the market conditions. New traders must try various strategies and find the ones that work well for them.