Trading has one definition, but since the market is versatile and people do not leave a chance to make money out of anything, trading has been divided into a lot of different sectors. CFD trading, day trading, Scalping, momentum trading are all different examples of the places where the trader’s trade. While the basic idea of trading is still the same: making money or buying low and selling high, different aspects or constraints make it more interesting.
Trading in futures contracts(often called future trading), for example, is not about buying low or selling high. Here, the game is to predict the market correctly and then make a bet. Day trading is mainly about buying low and selling high. The big players in the day trading arena also trade in a lot of different things. While the basic idea of a day trader’s asset can be stocks, traders who actively day trade and trade in forex, CFDs, Indices, and a lot more.
In this article, we will talk about trading strategies that can be of a lot of help to a novice trader.
To day trade, is to be a part of risk every day, some trading strategies can be of mitigated risk but day trading has loops of risk and loops of reward both. The traders are always at a risk of losing money.
When the traders buy and sell stocks the same day, it is called day trading. There are some things that a trader needs before he or she tries day trading hands-on. day traders sell and buy securities throughout a trading day. Forex, stocks, and futures, in that order, are the most played securities by day traders. Forex is the easiest to get in and probably the hardest to make money.
Leverage plays an important role here because traders make and lose money both, rapidly due to leverage. with a bigger market, leverage puts the trader a picture where they can lose the same amount of money. When leveraged trading happens with forex, wonders and hazards both are possible. good risk and money management can make all the difference.
People play with leverage in cfd trading too. it is important to understand that cfds are complex instruments and traders are at a high risk of losing money. CFDs should be traded very carefully. If the trader wants to make better profits, then he or she has to take the high risk of losing capital
The correct risk management is what makes the traders out of bad trades. things like stop-loss orders and not risking more than 1% of the capital are some of the strategies that can keep the profits around more than losses.
Forex trading strategy:
A forex trader uses a forex trading strategy to find out which currency pair to sell and vice-versa, at a given point in time. These strategies can be based on technical analysis and fundamental analysis both. sometimes news releases also play a huge role in creating a forex trading strategy.
Forex trading strategies can be created manually or can be automatic. all they do is generate signals.
The manual system will have a trader sitting on a system, looking at the signals and ensuring where to buy and where to sell. The automatic ones are a little different. Automatic forex trading strategies involve the generation of algorithms that automatically find trading signals and executes them too. When algorithms do the job humans were supposed to do, it takes the human emotion out of play and helps in increasing performance.
The latter systems take human emotion out of the equation and may improve performance.
there are also traders who sell their forex trading strategies to other traders. some caution has to be kept in this case because there is no way to verify how successful those trades have been for the sellers. this is the reason a lot of trading systems are kept a secret by the big players.
How to create Forex trading strategies for day traders:
Many forex traders who are day trading always notice that a particular currency pair tends to bounce back from a specific support and resistance level. this fact, however, is not enough to decide how accurate the strategy is. it can be added to the calculations but they should not be based solely on this fact. There can be a lot of different components that can add up into a very efficient force trading strategy.
The traders must know what they are trading and always know their preferred currency pairs. instead of shuffling between pairs, day traders in forex trading should become an expert in one pair. this is called knowing the stock market. apart from this, the size of the position and the entry points are also important. rules that tell precisely when to go long or short should be made and traders should abide by them as laws.
Traders can also develop their own trading systems in software’s like MetaTrader. these further help in the creation of rules that are automatically followed. also, applications like the MetaTrader always allow the traders to backtrack the trading strategies and then analyze how good they have been in the past. There are some things that traders need before they try day trading hands-on. Some of those are listed below.
(i) Trading platform:
A trading platform will make sure that all the moves that the stock market is making are right in front of the day trader’s eyes. Being careful enough and having the right money management plus the right platform can execute almost any strategy that the trader thinks has profit-generating potential.
While many brokers now offer their own indigenous trading platforms, the best out there is none other than the MetaTrader 4 which is now succeeded by the MetaTrader 5.
(ii) Trading system:
a system that can possibly crash should not be used for day trading at all. A system that can support the trading platform should be looked upon rather than looking at a fancy-looking system. A decent processor and a handsome clock speed generally suffice the use. Apart from this, a primary SSD is the next important thing because they offer far more speed and trading is all about speed. No matter what PC you choose, it will after a point of time, be replaced by a better version so ensure that you spend wisely.
Why should you have a trading strategy:
Trading strategies are very important because warriors never show up without a sword. If you make an account, put some money into it and if you are looking at an end-goal, then a trading strategy is a must. Apart from this, let us see why are some day trading strategies so important and why do they differ on the basis of trading styles.
A well-verified trading strategy ensures the survival of traders in the stock market. There are traders who believe in last-minute improv too, but they are eaten and then spit back out by the stock market on the fifth, probably the sixth day of their trading career. hence, to make profits and more importantly, to stay afoot in the stock market, it is important to make a systematic approach that can be applied without any changes.
News trading strategy:
The trader trading in the forex market always has an upper hand because the market is practically forever open. Short-term movements can be picked out from the stock market’s moves that happen because of news around the world. the forex stock market does not only responds to the economic numbers of the US but is also affected by news from anywhere around the world.
Let us see what’s in the news that can affect a whole market.
The traders should know which releases are about to happen in a particular week. also, optimizing the data in such a way that the most relevant is kept in a loop also helps a lot. that way. fewer data can be used for a better assessment. in general, information like change in the rates of interest, economic growth, inflation, and production in terms of industrial production is very important. The market can react to the news after the initial hours of its release. the news is less relevant after a couple of days in terms of profit generations. A study has released that the returns reflect the effect of a news mostly in the first two days. The impact of it, however, can still be seen up to the fourth day sometimes. the buy and sell orders are affected till the third day and the effect is reflected till the third day sometimes.
Trading news with options:
Breakouts offer a lot of trading opportunities and in the case of news trading, breakouts happen often. one way to capture the profits from these breakouts is to trade in options that are considered exotic. like the exotic pairs in forex trading. EUR/TRY, GBP/ZAR top the list. These options come in with barrier levels. These levels are the deciding factor in profits and losses, depending on how the trader breaches them.
Currency pairs and stocks always react to the news and announcements. for example, the covax scheme announcement where poorer nations would receive a covid vaccine for free resulted in a sudden increment in the prices of AstraZeneca, Pfizer, and johnson. all of these pharmaceutical giants are related to vaccine development directly or indirectly.
Other trade strategies for a day trader:
Traders earn more while trading CFDs. however, cfds are complex instruments and should be used carefully. traders make and lose money very rapidly due to leverage, which is the chief constituent of trading CFDs. there are a lot of day trading strategies that a trader can adapt even when trading in CFDs or any other instrument for that fact.
For trading in CFDs, the first and foremost thing to do is understand what they are and how they reflect profits and losses. being a leveraged product, CFDs provide the traders with a wider range of the stock market. this can be done with a very small margin or the initial investment. the thing to remember here is that the profits and losses are calculated on the basis of the market the traders cover, not by the money they use to enter that market. Another very important aspect is how the traders analyze the market to time their trades.
Traders often go with fundamental analysis and technical analysis to place their trades. the correct strategy can be using both and then calculating precise entry and exit positions. sometimes the calculations succumb against the market volatility. In such cases, stop-loss orders save traders from big losses.
Knowing when to get into a trade and when to get out of it is very important for traders. the fact that a lot of traders lose their money rapidly due to leverage and greed to earn more in the same trade is enough to tell the novices that emotion should be kept completely aside and mathematics and analysis should be given the most focus.
Price action and swing trading:
There are some things that traders need to know when they are swing trading. these things make the best out of them as swing traders. like pointing out the support and resistance levels, prices tend to keep moving around the support and resistance levels. swing traders should always know what these levels are. they are not the exact prices that should be used to make bets, but they can always be used as a reference for the prices by traders.
It is also important to find out what the crucial pivot points are. some also call them swing points but they would be very clearly identified. These are the points from where a possible reversal is about to happen.
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There are a lot of trading strategies and no book or article can hold all of them. traders are innovative in catching the flowing money in the stock market. it is better to create a personalised strategy and then work with it until expertise is reached. The best way to do this is demo trading, look for brokers who offer demo trading.