It requires immense knowledge, hard work, patience, and quick wit to do intraday trading successfully. Intraday trading is a work of patience rather than just execution. It takes a lot of time to gain expertise and master intraday trading skills. It is very important for new traders to trade strategically as it can be very dangerous if they don’t approach in a proper manner. Also, it depends on the market as well as the trading style of the trader. If one strategy works in the market for a day, that might not work on some other day as the movement of the market is different daily.
There are various trading strategies that one must keep in mind which have been discussed in detail in this article. But one must be aware that no strategy guarantees success as it depends completely on the market situations whether a strategy will succeed or not. Some intraday trading strategies are mentioned here:
- News Based Trading
It is the most basic and traditional way of intraday trading. The traders using his strategy focus on the information that will drive the prices rather than the prices of stocks and volume charts. The news can be any company announcements about new products or services, and general economic announcements or they even might be rumors as well.
Traders who do news-based trading are not any expert analysts but they usually have some knowledge about the markets. They know what news is in favor of the markets and what news would adversely affect it. They wait for the right opportunity and then invest in stocks.
Although news-based trading can give very high returns in a single day, it is a very risky path to opt for as compared to the other options.
- Momentum Trading Strategy
Investing in stocks that have momentum is directly related to the success in intraday trading. There are around 20-30% fluctuations in the stocks every day. Such stocks move on average and without any resistance in high volume. The trick here is that one needs to find the stock early and invest before any movement in the stock occurs. The movement can be either upward or downward. So, the profit to loss ratio in such stocks is around 2:1.
This strategy usually works during the early hours of trading, but on the basis of the movement, these can even hold positions for the entire day. The traders need to keep a close eye on the market trends and invest at the right time for maximum benefits.
- Reversal Trading Strategy
In this strategy, the stocks which are either extremely high or extremely low are taken into consideration by the traders. There are chances of path reversal of such stocks. It is also known as pull-back trading or trend trading strategy.
In this case, the traders wait for the movement to reverse and then mark stop when the values hit the maximum fluctuations. When the reversal value and the trader’s estimated limit are hit, the trade is executed.
A trader requires a detailed understanding of the market and a lot of experience to execute this intraday trading strategy.
- Bull Flag Trading Strategy
This strategy can be used for stocks whose prices have risen in the last few days at a very high rate. When a strong price movement occurs in any direction, a flagpole is formed and in this pullback zone, all the highs and the lows are parallel to each other. It is required for the traders to wait patiently for the flag to take shape and identify the spots for entry and exit, upper and lower trend lines, and stop-loss points. So, before any other trend sets in, traders have a chance to earn profits.
- Breakout Trading Strategy
It is one of the most commonly used intraday trading strategies. The traders need to identify that with the increase in volume, the price of stocks rises above or falls below a specified level. If the price of stocks rises above a specific level, the stock is bought and if the price of the stock falls below a certain point, the stock is sold.
This strategy is completely based on the observation of the traders and timing plays a vital role here.
- The Pivot Point Strategy
In case of a critical support or resistance level situation, this strategy is beneficial. It is a very beneficial strategy for forex marketing. It is used as an entry strategy for the range-bound traders and used by the breakout traders to understand the breakout levels.
- Moving Average Crossover Strategy
It is a price crossover strategy and every market has a moving average that determines the price of the stocks. To signify a change in trend, one needs to look for stocks that are either going up the average or going down the average. So, when the prices of the stock fall, it is a downtrend, and when the stock prices rise, it is an uptrend. The traders can make the decision accordingly for their shares. This is one of the most used intraday trading strategies.
The techniques mentioned above can be implemented effectively while intraday trading with the proper use of charts. One needs to be aware of the market trends and the events that are causing a change in their trends to earn maximum benefits. You can use these strategies based on the market conditions as many times one strategy might worry but the other won’t. You need to have a lot of experience and understanding of the market so that you get the required benefits and ace this world of trading.