If you take a look at successful traders, you’ll see they all have one thing in common: they develop a trading strategy that they have confidence in. Trading strategies provide control, discipline and a statistical edge.
For day traders, a good trading strategy is even more important, as day trading strategies differ from those of conventional investors – the mantra of buying low and selling high might not always be in a day trader’s best interests.
Instead, most day trading strategies try to take advantage of small market movements. If a market looks likely to fall, they might short it – as long as no position is kept open beyond the end of the trading day.
Here’s a few popular strategies to consider. Or if you’re looking for some advice on how to get started day trading, take a look at our day trading tips.
Day trading strategy one: trend trading
Trend traders attempt to make money by studying the direction of asset prices, and buying or selling depending on which direction the trend is taking.
If the trend is upwards, and prices are making a succession of higher highs, then traders take a long position by buying. If the trend is downwards, and prices are making a succession of lower lows, then traders take a short position by selling.
Trend trading isn’t exclusively used by day traders. You can keep your position open for as long as the trend continues – or if you are sticking to intra-day dealing, you can close it before the day is over.
Learn which tools investors use for trend trading.