Day Trading for Beginners

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Day trading strategy typically demands traders to enter and square off their positions on the same day. Day traders aim to gain profits from small price movements and use tools such as stop loss to minimize losses.

There are typically three types of techniques in the markets:

  1. Findamental Analysis - When traders base their research on a company’s balance sheet, ratio analysis, intrinsic value, beta, price-earnings, etc., to analyze a stock, it is called fundamental analysis.
  2. Technical Analysis - Some traders may analyze patterns on security price charts to analyze the current trend and forecast future price directions. This comprises technical analysis. Traders may use numerous indicators such as MACD (moving average convergence/divergence), Relative Strength Index (RSI), Bollinger Bands, etc., to determine future price actions.
  3. News-based Analysis - Some traders may prefer entering or exiting positions based on news alerts. They believe news could drive security prices in either direction. As a result, they stay updated with the latest news to make their stock picks or exit an existing position.

Top Strategies Employed by Day Trading Beginners

Day traders use multiple strategies to make profits from their stock market investments. Here is a look into some of the top strategies employed for day trading.

  1. Momentum Trading - Momentum trading strategy implies trading ‘momentum stocks.’ The trader using this strategy seeks to cultivate profits by investing in stocks that exhibit outsized volatility and price fluctuations. A momentum trader essentially seeks to identify trend waves and ride those waves to generate maximum profits.
  2. Scalping - The scalping strategy involves traders targeting profits from short-term price movements. Traders using scalping typically have a pre-planned exit strategy since one considerable loss and wash off their gains.
  3. Range Trading - Range trading involves building specific support and resistance levels to enter and exit the trade. Traders often use the Fibonacci retracement indicator to draw these levels.
  4. High Frequency Trading (HFT) - HFT is based on an automated computer-based trading system that automatically tracks price movements and places trades.

How Can Beginners Engage in Day Trading?

Beginners must open a trading account with their brokers to begin day trading. Maintaining a sufficient balance in your trading account is mandatory and required to place a trade. Next, you must research stocks diligently to add them to your portfolio.

What Qualities Do Beginners Need to Be Successful Day Traders?

Given below are the traits of successful intraday traders.

  1. Thorough knowledge of the stock markets - You must possess knowledge of the stock markets, how they work, the tools and strategies which can be implemented to maximize profits and to minimize losses.
  2. Invest a decent capital - Investing a decent amount into intraday trading can help you build a well-diversified portfolio that can help enhance your returns and mitigate risks.
  3. Backtest your strategy - There are numerous trading strategies available for intraday traders. To emerge as a successful trader, one must at least know the basics of all the strategies and pick the best-suited one.

Conclusion

Day trading has numerous advantages, but most of all, it can provide regular income. Traders must understand all the strategies related to day trading to enhance their returns and minimize losses. Beginner traders can revisit the day trading guide before trading.

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