After day trading strategies part one and day trading strategies part two obviously comes day trading strategies part three. In this part we will be explaining the core trading strategy and the short versus long trading strategy. The final paragraph is about where you can preactise day trading.
Unlike scalp and swing trading, core trading takes advantage of situations in the market that require longer lengths of time to develop. This day trading strategies for these types of trades, market assessments and decisions are generally made after market hours due to the busy activities of the trading day. Both detailed fundamental and technical analysis are very important before executing core trades. The challenge of core trading tests a trader’s skills at stock picking and predicting the future of stocks with this one day trading strategies.
Traditionally, speculative technical markets have provided the conditional environment necessary for core day trading. In many historical cases, the length of time for developing stock for a new business could be as long as a few months to a few years, while core trades are generally a few days to several weeks. These trading methods may require significant patience, but the possible profits from these markets are too great to ignore. Other key benefits to use core trading is for traders to hold specific positions as we wait for dominant trends in the market to further develop.
The following are necessary elements to remember when core trading:
The Core Trade Mindset – Since a longer period of trade is a consideration, you must keep in mind the larger price fluctuations by staying in tune with the overall perspective. This is very different from swing or scalp trading in that you need to be as detached as possible for the busy intraday trading issues. The idea is to think more and react less over daily fluctuations.
Separate Accounts – As an active day trader, you may be involved in scalp or swing trading in addition to your core trading activities. Having separate accounts for the your intraday transactions from your core trading actions will be easier to maintain, including the prevention unnecessary errors as you try to calculate your daily profits, losses and costs.
Dominant Trends – On a daily basis check the major market indexes such as the S& P 500, the NASDAQ composite, and the Dow Jones industrials. Specific stocks can either be up, down or moving to the side. If the market is on an uptrend, buy pullouts and breakouts. If there’s a downtrend, simply do the opposite. A sideways movement means the market is treading on uncertainty. In this case you need to maintain tight stops and go for the smaller profits.
Look for Strong Targets – Choose potential targets that are breaking out with a history of good performance during bear phases. If it’s possible that the market is moving toward a bullish market, these type targets may be a better investment.
Cheap Stocks – It may be tempting to purchase the bottom picks, but it isn’t necessarily in your best interest. Try to maintain the rules of trend and manage your risks in buying the stronger stocks and selling the weaker ones.
Technical Analysis – Follow daily and weekly charts on technical indicators in the stock market. Know the resistance levels, the moving averages, and volume trends. After you set your stop loss based on this information, stick to it. Technical analysis is often tell you more than fundamental analysis.
Fundamental Analysis – Fundamental news and analysis is often beneficial as a cross-reference with the information you derive from you technical analysis. Also, a very important news can promote a dominant effect or trend in the stock market. Wide Stops – Keep your reward-to-risk ratios realistic with the stock movement and as key market trends shift one way or the other. Continue to set your stops and exit points according to resistance levels from your technical and fundamental analysis.
Small Bets – Small bets always keeps your risks lower than larger bets with more to lose. Several small winning trades could add up to a large, significant profit. The benefits of small bets include:
1) You can build a large trading position by adding to a little at a time as the market swings in your favor.
2) If the stock moves against you, it’s easier to exit at a faster pace.
Technology Issues – With technology always moving forward in leaps and bounds, especially in our day and time, consider any technology-related issues. This is the market where you can usually find many of the large price moves.
Stock Knowledge – Core trading requires significant understanding of the stock’s nature such as the products and services that the stock’s business is involved. Necessary fundamental knowledge is very valuable, and therefore, requires a great deal more research and analysis than swing or scalp trading.
Decisive Exit & Entry Points – Even though core trading is significantly different from swing trading, the knowledge of intraday price swings will still be helpful as you determine a down momentum or an approaching rally in the market. These market forces produce the relative points at which you choose to enter and exit a core trade, thereby a huge factor in your success.
Go with the Flow – Don’t ignore or balk against trends that could significantly increase your losses. This is self-destructive behavior that could end up being very financially painful. Take advantage of the financial opportunities that trends provide instead of moving against them. When the trend dies, you can move on.
Long trading is a usefull day trading strategies when you buy a stock with the intention of later selling it at a higher price. Shorting stock is when you sell stock with the intention of later buying it back at a lower price. Short trading appeals to many on the basis of market cycles, in which
downtrends are virtually unavoidable, falling faster than they tend to rise on the trend. The disadvantage to short selling is the fact that the market will eventually always swing back up, which increases the price of the stock you intend to re-buy at a lower price. Plus, not all stocks are available for shorting at all times. For instance, you cannot short a stock on a downtick. Shorting is only possible on upticks. These rules are were established by the exchanges to prevent market sell-offs from occurring as they did in 1929, throwing the U.S. economy into a deep depression along with many other factors. Please note that specialists and market makers are exempt from this rule. One clear way to tell whether or not to sell short is by reading charts, dcumenting market indicators with Bollinger bands. These are exponential bands with two standard deviations, measuring high and low volatility levels. A stock price at the top of a Bollinger band is very likely to drop down to its lower.
Day Trading Indicators You Can Use
Bollinger band – A good indication to sell short. Wide bands indicate high volatility, while narrow bands indicate the opposite. You want to monitor the moving average (MA) until it reaches a double top in the shape of an M. This is an indication of a major drop on the brink and a potential setup for selling short. What is happening is the stock in an uptrend is weakening. It reaches a high point, sells off for the slight dip, and then reaches another high. The second high point cannot break through the resistance, reaching past the point of the first high. Stockholders grow a bit nervous and begin selling off, plummeting the stock into a downward slope.
When choosing a stock for a short sell, look for steep rises. This indicates chat the sharper the incline, the sharper the drop. Also, the less support a stock has, the further it will fall when the drop comes. The moment a stock penetrates the support resistance, trading at 0.125 below that mark, you need to place a limit order selling short the desired amount of shares at the inside offer price. Here are a few DON’Ts when considering selling short: don’t sell a strong stock short if it happens to be in an uptrend. If you think a stock has risen too high, don’t short a stock based on that reason alone. Many traders have a history of getting burned on such loose reasoning. Use the straight facts from market indicators to make decisive determinations in whether or not to sell a stock short. Likewise, don’t ever sell a stock short simply because it takes a dip. If you’re looking for an indication that a stock may be weakening, it isn’t necessarily at the first couple of lows. Wait until it trades for a 30-minute low before you consider selling short.
As a new trader, you should avoid scalping shorts until you can a reasonable amount of experience. The reason for this is the risk factors are very time consuming with difficult entry points, and often very imprecise fluctuations. It is unwise whether you are trading long or short, to trade a stock with very little volume such as 300, 000 daily shares.