No two day traders are exactly alike, and neither are their day trading strategies. Choosing the right day trading strategy is a matter of trial and error, with eventual success as you discover the right fit. All strategies involve timing, entries and exits and the use of specific tools – you just need to determine which suits you best. Your day trading strategy depends on your goals, financial condition and the securities you prefer to trade. Some classic day trading strategies, such as simple moving averages, are relatively straightforward, requiring little in the way of charts and indicators, while others are more complex. A novice trader may want to expand their day trading strategy as they become more seasoned and sophisticated – and successful.
When trying out different day trading strategies, look for essential elements. These include historical analysis, so you know the feasibility of the method; necessary research; money management and the timeframe. There’s another element that has nothing to do with strategy per se, but is crucial. That element is discipline. Treat your day trading as a business from the beginning, and create a business plan. Discipline yourself to trade at the same time every day. No day trader has ever been successful without a strict regimen, but that does not mean the routine practiced by one day trader will work for another.
You may want to experiment with different types of securities to broaden your day-trading horizon. Once you master a stock trading strategy, for example, you may want to devise a strategy for trading options. By learning more about various types of trading, you’re more likely to find the day trading niche best suited for your personal style.
Jim O’Shaughnessy: Fear Signals Created By The Reptilian Brain
ValueWalk's Raul Panganiban interviews Jim O’Shaughnessy, Chairman, Co-chief Investment Officer, and Portfolio Manager at O’Shaughnessy Asset Management. In this part, Jim discusses the fear and emotional signals created by the reptilian brain. Q1 2020 hedge fund letters, conferences and more That's very cool. For the factor to try to seek the reason why it works, Read More
In the best case scenario, your day trading strategy offers mathematical probability for success when you follow this plan over the long term. While you want to concentrate on making money – that’s a given – your strategy must also encompass ways to minimize losses. That means developing a personal risk strategy early on. Day trading isn’t for the faint of heart, but proves rewarding for those who find a working strategy. Start out by mastering the easier strategies and continue toward the more esoteric. Work with a simulator and see your paper results before putting your own funds to the test. When you find the right strategy – or strategies – that work for you, it’s both intuitive and performance based.
Infographic by Sure Trader