As it is known, financial markets are the basis of the functioning mechanism of the world economy. The stock market is one of the branches of the financial markets. There are many ways to make money if you are stock exchanges, and these ways differ according to people's tolerance for risk. One of the most common of these methods is daily trading and the how to be a stock trader is a common question.
The person who do not know the definition might ask “What is daily trading?” . The transaction of buying and selling a financial instrument one or more times a day is called daily trading. In daily trading, the goal is to make money from small price movements, but this is not suitable for everyone and is a risky move. It is very important to have a regular data flow and to use the right platform when trading daily. With the right data, daily news , charts and models, visiting Finage will be a very good start for daily trading. Now 10 day trading strategies will be examined.
- Serious research should be done in order to benefit from daily trade.
- Daily trading is not a hobby but a business, so those who do this work should be objective and keep their emotions out of this business.
- At Finage, you can find some charts and knowledge to become a successful day trader.
1. Knowledge is Power
Information is the most important power in your hand while performing a transaction. In addition to basic trading procedures, detailed information about the stock to be traded, Fed's interest rates, economic outlook and the latest market news should be followed, and trusted sites such as Finage should be followed.
2. Allocate Funds
You should determine the amount you can risk in each transaction and stick to your principles. This ratio can be around 1% or 2%, depending on your risk tolerance.
3. Set time aside
The main point in day trading is speed. Day trading is not like long term investment, you need to devote most of your time during the day. It is not a very suitable method for those who are busy with different jobs during the day because it is quite possible to miss opportunities during the day.
4. Start Small
In the periods when the transaction is first started, it should be started with one or two stocks and the amounts allocated to the transactions should be limited. This makes it easier for you to focus and learn by concentrating on fewer stocks while protecting the majority of your portfolio.
5. Avoid Penny Stocks
Penny stocks will often not be well suited for day-to-day trading as they are illiquid and can only be bought and sold over the counter (OTC). For this reason, attention should be paid to penny stocks and should be avoided if possible.
6. Time of These Transactions
Investors and traders in the stock market generally start their transactions in the morning as soon as the markets open. For this reason, fluctuations in these hours are very risky. Experienced players are familiar with these fluctuations and patterns, so they can turn them into opportunities and make good gains. However, inexperienced traders should be careful and trade at times when volatility is less.
7. Stop Losses with Limit Orders
One of the main points is to decide on the order type to be used before entering the transactions. It is a critical decision whether to use market orders or limit orders because when you place orders on the market, you cannot predict exactly what price to trade at that moment, but limit orders prevent losses by ensuring the price to be traded.
8. Be realistic about profits
When measuring the success of your strategies, you should keep in mind that traders do not make money on every trade, but only from 50% to 60% of their trades. The main point is to maximize the amount of money used in successful trades and minimize them in unsuccessful trades.
9. Stay calm
The common feature of successful traders is that they act with logic, not emotions. You have to keep greed, hope, and fear in check.
10. Stick to the Plan
Another common feature of successful traders is that they act fast but do not make quick decisions. Because traders who have already set up their strategy do not have to think fast because they act according to their strategies. A common phrase among day traders "Plan your trade and trade with your plan." is a very good guide.
Now some of the reasons why day trading is so difficult will be examined below:
Difficulties of Daily Trading
Day trading is inherently a difficult process. Therefore, it requires a lot of practice and knowledge. While doing daily trading, you must remember that you are in competition with people who have devoted their lives to this business and whose careers are on this axis. These professionals use the best technologies in the industry and get the best connections. For this reason, "How to use real-time stock market data?" The question becomes very important.
Another difference is that professionals are free from emotions and psychological bias compared to individual investors.
What and When to Buy for Earning More
Day traders take advantage of the short-term price movements of individual assets such as stocks, currencies, futures and options and try to make money with large amounts of capital. There are 3 basic points that day traders look at when trading:
1. Liquidity: High liquidity allows you to enter and exit a stock at a good price.
2. Volatility: It is a measure of the daily price range. High volatility means wider price ranges and more profit or loss.
3. Trade Volume: Transaction volume can be summarized as a measure of how many times a stock has been bought and sold in a certain period of time. The increase in transaction volume is the harbinger of downward and downward price movements.
After deciding on the stocks to buy and sell, you need to decide exactly at what point to buy. Tools that can help you with this are Real-time news services, ECN / Level 2 quotes and Intraday candlestick charts. By easily integrating Finage's Stock API into your trading platform, you can obtain real-time stock data and historical. You can access the data of many financial trading instruments such as stock data, cryptocurrency data.
The conditions under which the day trader will enter the position must be specifically defined. So it is not enough to decide to buy just by looking at the rise. It must be decided specifically from which point to enter the formation or pattern. After these are determined, sales strategy can be discussed.
Deciding When To Sell
There are many ways to close a position and take profit. Profit target is the most used of these. Here are some common target price strategies:
- Scalping: Selling immediately after a trade becomes profitable.
- Fading: In this strategy, the price target is when buyers start to come into play again. It can be a little risky.
- Daily Pivots: A strategy to profit from the daily volatility of a stock. Traders buy at the lowest price of the day and try to sell at the highest.
- Momentum: The overall goal in this strategy includes trading in newsletters or capturing strong trend moves supported by high volume.
Just like your entry point, define exactly how you will exit before entering your trades.
Daily Trading Charts and Formations
Daily traders generally use the following:
- Candlestick patterns, including engulfing candles and dojis
- Technical analysis, including trend lines and triangles
- Volume — increasing or decreasing
Traditional chart model analysis also helps to determine target prices for exits. For example, the break point of the formations, including triangle patterns, are good signs.
How to Limit Losses in Daily Trading
As mentioned before, daily trading is a risky process. For this reason, the stop loss order is designed to limit losses on a position in a security. The stop loss strategy may differ in long and short positions.
Two stop loss points can be as follows:
- Placing a physical stop loss order at a specific price level that matches your risk tolerance.
- Setting a mental stop loss determined at the point where your entry criteria are violated
In addition, if you decide to end your trades and exit, your exit criteria should be absolutely testable. For this reason, it will be the most appropriate method to test and verify all strategies established for trading using demo accounts before trading. If the established strategies work correctly and profitably, then you should start trading with real money. Extra care should be taken when making credit and leveraged transactions.
Now that we've talked about the pros and cons of day trading, let's look at some of the basic strategies that day traders use.
Basic Daily Trading Strategies
We have already mentioned some popular techniques that can be used after reaching a certain experience in the markets and setting profit targets, but it may be useful to mention again:
- Following the trend: In this strategy, traders buy when the uptrend starts and sell when the prices start to decrease. Of course, in this assumption, it is predicted that price increases and decreases will be regular.
- Contrarian investing: In this strategy, you trade in the opposite way to price movements.
- Scalping: In this type of operation, the entry and exit of positions must be serial.
- Trading the news: Good news is a buy signal and bad news is a short selling opportunity in this strategy. Profits and losses can be large.
As we mentioned before, day trading is difficult. You need to take time, be resourceful and disciplined. Although those who try are usually unsuccessful, it can be successful if the above mentioned techniques and guidelines are followed.