Day Trading Strategies for Beginners

Once you are confident with your trading plan, it is time to open your first position. Within a single trading day, it is likely that you’ll want to place both long and short positions. If you think that a market is going to rise, you would opt to ‘buy’ the asset, whereas if you think that a market is due to decline, you would choose to ‘sell’ it. The theory is that you can just as easily build a big trading account by taking smaller profits time and time again, as you can by placing fewer trades and letting profits run. Also referred to as intra-day trading, day trading is not for the part timer as it takes time, focus, dedication and a specific mindset. It involves making fast decisions, and executing a large number of trades for a relatively small profit each time.

Day Trading Strategies for Beginners

However, with solid trading tips and strategies, and trend analysis, the cryptocurrency market could be profitable. It’s a costly mistake to enter crypto day trading without adequate research on the market and your targeted investments. To do well with news trading, day traders tend to have a solid understanding of the markets in which they’re trading. Day traders looking to maximize intraday profits often use one or multiple of the following day trading strategies.

Choose how to day trade

The primary lure of day trading is that it provides the opportunity to grow and compound investment returns very rapidly – potentially, to earn a good living from trading. Lets say you bought 100 shares of your favorite day trading stock and your P&L says you are up $98. If you tend to make the $100 full, then you understand the idea behind the concept of round number trading. News trading can be exceptionally profitable by trading during pre market hours before other market participants read the news story.

  • For now, let’s look at the basic concept of support and resistance levels.
  • It helps to maximise profitable day trading positions, but it also magnifies losses when open positions go against traders’ expectations.
  • Note whether your stop-loss order or price target would have been hit.
  • If you think that a market is going to rise, you’d opt to ‘buy’ the asset, whereas if you think that a market is due to decline, you’d choose to ‘sell’ it.
  • End-of-day traders can then speculate how the price could move based on the price action and decide on any indicators that they are using in their system.

A suitable way to determine whether a crypto asset is good for day trading is to analyze its trading volume and liquidity. Monitoring short-term price action is used to identify optimal entry and exit positions. As a result, many traders consider it a buy signal if an asset’s RSI falls below 30 as they believe that this indicates that the asset is ready for a bounce. Conversely, many argue that an RSI above 70 is a signal to close their positions as it indicates that the asset has been overbought and is likely to begin falling in value.

Always use risk management

Moving averages can provide data on the average price of an asset over various periods ranging from 5 minutes to several months. The investing legend Benjamin Graham, renowned author of The Intelligent Investor, has described day trading as nothing more than “high-risk, short-term speculation”. However, with the development of the internet and the online trading platforms that have followed, it is now easier than ever for the average investor to begin day trading. Traders make this common mistake when they are unwilling to accept that they made a mistake or a good trade turned against them. Holding on to a losing position in the hope that the market will turn around can result in significant losses.

Is day trading profitable for beginners?

If you're thinking about day trading for the first time, it's important to know that day trading profits are hard to come by. You can make money day trading, but you'd be in very limited company. The paradox of day trading is that it may seem like a good idea, depending on how the stock market is performing.

Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized Day Trading Strategies for Beginners advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Therefore, if you notice that your trading isn’t going very well when you start to live (compared to the demo), know that this is natural.