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Day Trading Strategies

Updated on November 17, 2010

Also called active trading, day trading is where you are buying and selling various financial instruments such as stocks or currencies, and these are sold the same day, before the closing of the markets.  In addition to stocks and currencies, you can trade stock options, futures contacts, commodity futures, interest rate futures, and all other sorts of things.

If you are considering becoming involved in day trading, then you definitely should try and learn all you can, and gather different strategies from online and from reading books about day trading strategies.

If you don't take the time to learn about day trading, then you are definitely going to put yourself in a bad financial position, as you'll be relying mostly on luck when dealing with trading stocks.  The key is to learn as much as you so you don't have to rely on luck, instead you can make the best, solid decision that you can when it comes to day trading.

Watch For Volatile Stocks

One good day trading strategy is to keep your eye out for stocks that tend to be pretty volatile.  Obviously, these stocks could either be very good for you or very bad depending on which way they swing, but they are definitely something to keep on eye on. By going for these types of stocks, you'll be able to make more of a gain throughout the day.

While focusing on steadily rising stocks is a great long term investment strategy, for day trading these stocks won't really be able to make you a lot of money, and so try and stay away from those stocks that are steady.

K.I.S.S. - Keep It Simple Stupid

This quote and acronym is used often in many different fields, and it applies to day trading also. In essence, day trading is as easy as buying low and selling high, and finding the stocks that will go from low to high throughout the day. Often times, people really try to complicate what day trading is, and a lot of the strategies for day trading. This isn't to say that you don't need to do your homework and learn, but often times people are simply trying to do too much, and they end of failing because of it. Just keep it simple, focus on one strategy, and make that money!

Beginners: Trade Small

If you are a beginner, then I would definitely recommend that you don't make large trades and you should not make too many trades at once because you can become too overwhelmed.

Although small trades won't pay off huge, it will also help you to be able to minimize your losses. And by focusing on smaller trades and focusing on smaller amounts of trades helps you to be able to focus on one or two things at a time, so that you can maximize your earnings.  A day life commodities trader has to start somewhere!

Scalping

No, this doesn't mean cutting off people's scalps like a savage, instead it means just making a small profit on your trades.  It's not about trying to milk the stock for all you can, but instead just making some sort of profit by selling the stock when it rises after you buy it.

The key is to find the stocks that are currently rising and to pick them up, and hope they continue to rise, and sell them once they do.  You won't make a lot from it, but you'll steadily make profits if you are following this trend.  The whole focus of day trading is to buy and sell stock within the same day.

Momentum

Going with stocks that have momentum is definitely a good strategy for long term investing as well as day trading.  Finding stocks that are supported with high volume is definitely important and so watch for when the volume starts to drop.  This will be your signal.

Conclusion

Day trading can definitely be profitable, but if you don't know what you're doing and you're not using different strategies to your advantage, then you'll probably end up losing money and therefore being turned off from doing day trading.  Day trading is exciting and a great way to make money, but going in relying on luck is not what you need to do.

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