3 Strategies for Day Trading Success: How to Build a Winning Strategy

Introduction: What is a Day Trading Strategy?

A day trading strategy is a plan that traders implement to make the most out of small price changes in the market on any given trading day. To find the best strategy, traders should look for a strategy based on technical analysis, utilizing studies such as charts, indicators, and patterns - all of which are used to predict future prices.

In this article, we will take you through a thorough breakdown of how day trading strategies work and what novice investors can do to sharpen their skills when it comes to creating a solid plan for themselves!

When starting, it's easy to get overwhelmed by the complexity of trading. There is so much information out there that can be confusing and discouraging. Before you become bogged down with all of these technical indicators, make sure to have a basic day trading strategy in place. While many experienced traders wait for highly complicated strategies that may never pan out, you'll likely notice greater success when keeping things simple. 

The Fundamental of Day Trading Strategies.

Money Management: Before you start trading, go over your trading plan a few thousand times and decide how much capital you're willing to risk. Bear in mind that discipline is key when making money in the futures market stock market because the most successful traders aren't those who bet their entire account in one trade (or even in a few trades). They're those who know how to save their capital by letting their winners run on their winning trades and cutting the losses short.

Time Management: Don't anticipate making a fortune in the beginning. Learning to manage your time so that you aren’t in front of your computer trading all day is absolutely essential. Starting small and learning how to grow is always a great idea! As time goes by, you’ll be able to add more contracts and increase your profit potential while utilizing the same amount of time to trade.

Take First Step: When learning how to trade on one's own, it's best to practice as much as possible. Otherwise, you might find yourself unable to manage your performance and predict future movements, which can prove quite expensive in the long run if you don't know what you are doing.  The “click and say a prayer” method doesn’t work as often as some would like.

Wisdom: While it may seem like you have a firm grasp of the market, which is excellent, there are still new aspects to learn when it comes down to financial investments. One of the best things you can do for yourself is to find yourself a dedicated mentor that has been in the game a while and can offer invaluable info that you can use and that can contribute towards maximizing your profits. There will come the point when you start delving into what works and where best to invest when it comes to your moneymaking endeavors, so as soon as you have a great mentor, share it with others who could benefit from what they could get from it. 

Fear of Failure – FOF: It is far easier said than done to keep our emotions in check daily. What you may feel at work might not be reflective of your true feelings, and if you suffer exhaustion or fatigue, it becomes harder to cope with the everyday stresses of your job. So when this happens, make sure you take time to rest and re-energize yourself daily to avoid burnout. It would be best if you let math, logic, and your strategy guide you, not nerves, fear, or greed. 

3 Day Trading Strategies

If you're after automated day trading strategies or beginner and advanced tactics, you'll need to consider three essential components; volatility, liquidity, and volume. You'll want to choose a stock that has high volatility (how much the stock price fluctuates up and down per day), high liquidity (how easily shares can be bought or sold), and plenty of volumes (a lot of buyers and sellers).

The Trending Strategy

News surrounding countries, markets, or companies can create high volatility in the market. High volatility means a higher likelihood of experiencing gains (i.e., profits) and losses. Profit-taking traders use this to their advantage by buying pullbacks to find a lower risk when the market is continuing in one direction with some strength.

Just be advised that, along with the benefits of global and economic implications on trading, you may also lose your shirt. Return on investment will not come overnight as an Emini Futures trader, especially if you are just starting out. You can practice by trying what the market is telling you by using things like Market Replay in NinjaTrader.  It will allow you to replay, speed up or slow down old market data so you can practice trading it just as it was in life.  Or you can even trade the live market in a simulated situation to get the continuous feel of what it is like to place trades in the Futures markets.

The Scalping Strategy

One of the most popular strategies is scalping. It looks to capitalize on quicker or smaller price changes in the ever-changing market.  This typically means that you are quickly getting in and out of the market while making quick profits.. You will look to sell as soon as the trade becomes profitable. This is a fast-paced strategy that works well for some trading styles, but it can be tough. It would be best if you had a high trading probability to even out the low risk vs. reward ratio.

Unskilled traders will look at this as risky because they will use an inverse risk vs reward ratio, meaning that they have more risk than reward on the table and could find themselves in trouble quickly.  But with a proper strategy that gives you high trading probability, you will have more reward than risk on each trade and will have carefully calculated where the risk and profit target should be located for maximum win potential.

The Reversal Strategy

Although traditionally frowned upon and even considered dangerous, trend reversal trading is used all over the world. It's also called reverse trading, mean reversion strategy, and pullback trending. This strategy is a way to buy/sell either when a market is moving against investors' expectations or on potential short-term fluctuations in trends before they start heading the other way again. To be effective at this strategy, you must be able to accurately assess current market trends. For example, detecting a strong divergence between your price and your MACD indicator shows that the price has already risen too high and is at risk of dropping further. Then predict its strength after the pullback or reversal has occurred. This requires both in-depth knowledges of your market patterns coupled with experience and excellent judgment skills of how your price and indicators behave together.

Trading has changed significantly over the last decade, and those changes aren't slowing down anytime soon. Your trading has to evolve, or you risk getting left behind by the competition, most likely doing just that. The goal is to become more compatible with the market and develop new strategies, to allow traders access to profits that would have otherwise been impossible to use previously. Understanding what kind of trader you are and what kind of risks you’re willing to take will be some of your greatest assets - on the battlefield and when it comes down to making money!