Day trading usually refers to the act of trading stock within the same day. The traders who participate in day trading are known as day traders. Day traders usually aim at maximum profit in the each and every turns that undergoes every day. They trade based on certain strategies that suits with the changing market and economy condition. One of the commonly used trading strategies is entry strategy.
This is commonly used by the retail day traders. They mainly look for the liquidity and volatility of the available stock. According to this strategy, the profit or loss depends on the volatility factor. Liquidity is a trading factor that guides you to enter and exit a stock trading at good price. Volatility refers to the daily price fluctuation.
In this strategy, once you have identified the kind of stock you are interested in, you need to recognize the possible entry points. There are many tools that help you to identify the points. Candlestick patterns, real time news service etc are some of the commonly used tools. Doji reversal pattern is one of the best proven ways to identify the points.
Scalping, fading, daily pivots and momentum are other day trading strategies preferred by the day traders.
Stop-loss is a major concept in day trading and is of crucial importance if you are trading on margin. Certain strategies use two kinds of stop loss, physical and mental stop loss. The former one is a kind of risk tolerant that is essential in case of a loss. The later kind helps you to get out of the position if any unexpected move happens.
Day trading is not as simple as you think. It requires great care and supervision. A simple carelessness can lead to lose in the trade. You can improve your position only with high quality strategies and great experience.
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