Day trading is a lucrative money making business, which comes with an increased trading risk. If you are thinking of investing and making profit in day trading, there are a few strategies you must follow religiously while working.
Day trading options is the act of trading (i.e. buying and selling) financial instruments within a day with the intention of making profit. Based on their nature, options can provide greater profit than day traded stocks but unlike buying and selling of stocks adding options in your day trading lists comes with increased trading risks. To make profits out of day trading options, certain trading strategies must be used.
Scalping is the most commonly used day trading options strategy that involves selling stocks right after they become profitable. The trick is to make small profits from many trades possible. Eg. if you purchase stocks that are worth $20 each and then sell them at around $20.25 each, you will make $0.25 profit from each stock sold. Even though small quantities of stock will yield small profits, large quantities of stock will yield huge profits.
Fading is the act of shorting stock as soon as it makes a fast upward move. Profit target in fading is when the stock buyers purchase stock thus driving down the stock price. As a result technical indicators show/ indicate that stock has been over-purchased and is ready for price decline, termed as “price trend reversal.” People who bought the stock when the price was lower might make a profit, while those bought the stock a little late risk losing because the price might drop at any given time.
Daily pivots focuses on high-risk/ highly volatile stocks, whose price can go either too low or too high. If you buy stocks at the right time and the price shuts upward, you can sell them at a good profit. However, this can lead to huge loss if the price of the stocks dips too low. Traders who use this strategy to make profit implement it on stocks with major price movements. Such traders make profits through price reversal signs by purchasing stocks at the lowest price of the day and then selling them (stocks) at the highest price of the day. Reversal signs generally indicate that the stock’s price will reverse and they include pivot points or expected lowest or highest price of stocks as well as gradual price downward and upward movement. E.g. If you want to purchase stocks, wait until the day’s lowest pivot point is reached before buying them. If you want to sell the stocks and make a profit, wait until the day’s highest pivot point is reached before selling. The highest or lowest pivot points are reached when the stock’s prices begin to make upward or downward movement.
Momentum generally focuses on the news releases. Traders who use this strategy trade in stocks that are backed up by large volumes of at-least 500,000. Profit targets in momentum are when stock volumes begin to fade and also when the candlesticks show price reversal signs. Candlestick is a price chart which shows the close, open, low and high for stocks within a given period of time in a day. Stocks are usually plotted around the zero line and if the stock’s reading is above zero, it is considered bullish or optimistic but is the reading is below zero then it is bearish or negative. The momentum of the stock is calculated by determining the ratio between current stock volume and previous stock volume and multiplying the resulting figure by 100. If the figure that you get is greater than current stock volume then the stocks are in momentum. Since it still go higher wait for reversal signs by waiting for minimal downward movement.
The author of this article is a seasoned futures trader who recommends newbie emini traders to watch live trades with real money in a live emini trading room. That is the best way to learn profitable trading.
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