In day trading, the ability to read charts is basically a survival tool. Understanding the current price movement of the stock will help predict its future movements. Historical data is used to determine price patterns and make predictions out of it. This is based on the logic that historical patterns tend to repeat over time. It might seem complex at first but it’s a simple logic that even ancient people used to say. This one is also applicable to trading. The second factor of these day trading strategies for beginners is risk management.
The following are the best day trading strategies for beginners:
Buy Dips (Long Trades), Sell Pops (Short Trades)
When you buy dips and sell pops, you are in a way reducing the risks in a possible price move that you anticipate to happen. Basically, you sell into strength and buy into weakness. This means that you will get better transactions as you anticipate a move.
Failed Follow Through Momentum (Short Trades)
This occurs when a breakout above resistance almost occurs, but doesn’t. This is a good selling opportunity, especially that the initial move was strong.
While using this particular forex day trading strategies for beginners, you must look out for: (1) Initial momentum, which means that there was a strong price rally earlier in the day; (2) high of day (HOD) breakout attempt, which checks the breakout attempt of the price above the current HOD; and (3) failed follow through, which means that the price attempts to break again after the first one, only to fail again. The movement’s higher volume makes the rejection stronger.
VWAP Tests (Short and Long)
VWAP or Volume Weighted Averaged Price reflects the average price that a certain stock is traded. This is a strategy that works best in interpreting money flow and important price levels.
This indicator can be used as a determiner of risk, as either the support/resistance level, and triggers for a reversal in trade.
Red/Green Moves (Long Trades)
In this strategy, the price is in red if it trades below the last day’s closing price. It is in green if it trades above it.
When the price moves from red to green, it means that the price is trading at above the previous close from below. This is a substantial momentum shift that can be used as a basis on opening a trade. You can set the risk level near the previous day’s closing price.
Double and Triple Bottoms (Long Trades)
Theoretically, the price movement of a certain stock can drop forever however, it will still find short-term bottoms as it drops. These so-called bottoms are useful in determining a possible reversal in trend.
The photo above shows the price attempting to breakout, then fails, then retests for a couple of times. This means that the price underwent double or triple bottoms (circled), creating levels of support and resistance.Each strategy has its own style of trading and advantage in it. As a beginner in forex, remember that two to three forex day trading strategies are enough to lead you to profits.