Day Trading

What is Day Trading?

Day trading is a well-liked short-term trading strategy in which traders aim to profit from slight price swings by opening and closing trades on the same day.

Based on their predispositions, these traders take a side at the start of the day and end up making a profit or a loss.

Trades are not held overnight by day traders.

Forex traders who have ample time during the day to analyze, execute, and monitor their trades are good candidates for day trading.

You might be a forex day trader if:

• You like to enter and exit a trade within one day.
• You’re patient enough to wait a couple of hours to close a trade
• You have time to analyze the markets at the beginning of the day and can monitor it throughout.
• You like to know where you’re at with your trades at the end of each day.
• You think scalping is too fast but swing trading is too slow for your taste.

You might not be a forex day trader if:

• You don’t have enough time to analyze the markets and monitor them throughout the day.
• You like longer or shorter term trading.
• You have a day job.
• You prefer one big profit rather that a couple small ones.
• You don’t like looking at charts all day.

Types of Day Trading

The following day trading methods are frequently used by day traders who want to increase their intraday gains.

Trend Trading

Using lengthier time frame charts to identify a general trend is known as trend trading. Although it is typically thought of as a mid-to long-term trading strategy, depending on how long the trend lasts, it can actually cover any timeframe.

It is predicated on the notion that markets are somewhat predictable, and that a trader may forecast future events by examining past trends and price changes.

A trend is formed when the price moves in a single general direction, such up or down.

When an asset is trending higher, trend traders open a long position. Greater swing highs and lows are indicative of an upswing.

When an asset is heading lower, trend traders could decide to open a short position on it. Lower swing highs and lower swing lows are indicative of a decline.

Countertrend Trading

Using the countertrend day trading method, traders try to make trades against the prevailing trend.

Finding the trend’s end and entering the market before it reverses is the aim here.

Generally speaking, swing trading, which describes the chance to profit from a trend that reversals or swings in a different way, is synonymous with countertrend trading.

Generally speaking, countertrend trading is a medium-term technique where positions are held for a few days to a few weeks.

Although this approach has a somewhat higher risk, the long term benefits could be enormous.

Range Trading

Understanding the most recent price activity is the first step in range trading, also known as channel trading.

A trader will look at chart patterns to determine the day’s normal highs and lows while monitoring the difference between these marks.

In the event that the price has been rising or dropping from a support or resistance level, for instance, a trader may decide to buy or sell depending on their assessment of the direction of the market.

This is referred to as “trading in a range” since the price always returns to the low after reaching a high. And the other way around.

A long-term day trader employing this method will purchase near the low price and sell at the high price.

When employing this method, a day trader seeking to go short will sell near the high price and purchase at the low price.

Breakout Trading

When a trader looks at the range a pair has established during specific hours of the day, they can place trades on either side in the hopes of catching a breakout in either direction. This is known as breakout trading.

While there are numerous strategies that support trade execution in reaction to the state of the market, breakout trading encourages market participation by projecting a future move.

Since it usually forex signals that a move is about to be made, this is particularly useful when a pair has been in a tight range.

The idea is to have everything lined up so that you are prepared to catch the wave when the move happens!

News Trading

One of the most common, short-term focused trading tactics employed by day traders is news trading.

News traders wait for information to be revealed that they feel will move prices in one direction or the other, paying less attention to charts and technical analysis.

For instance, a report disclosing economic data on inflation, unemployment, interest rates, or the like, or just breaking news or sporadic tweets from the president, could contain this information.

Day traders need to have a firm grasp of the markets they are trading in order to become proficient news traders.