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Day Trading: Scalping, News Trading, and More

Adam Lienhard
Day Trading: Scalping, News Trading, and More

Day trading is a strategy where traders aim to profit from small price movements. They open and close positions within the same trading day. To identify potential trading opportunities, day traders use various technical analysis tools and indicators while often trading with high leverage to maximize their profits.

5 types of day trading strategies

Short-term price movements have a great potential for profits. So analysts distinguish five strategies for day trading:

Scalping is a trading strategy that involves quick trades and small profits. Scalpers open and close trades within minutes or even seconds. Scalping demands a great deal of discipline and focus. You must be able to make swift decisions and execute them without hesitation.

Momentum trading is based on recognizing assets with strong directional movement and placing trades in the same direction as the trend goes. The concept behind momentum trading is that stocks that are currently moving in one direction are expected to persist in that direction due to their momentum.

News trading entails making decisions based on news releases and economic data. Traders closely monitor the economic calendar, seeking chances to trade on the anticipated impact of such releases.

Breakout trading involves finding assets that are currently moving within a specific range and entering trades when the price breaks out of that range. When an asset breaks out of range, it is anticipated to continue moving powerfully in the direction of the breakout.

Pattern trading is based on technical analysis, where patterns in assets are identified. Traders search for chart patterns like Head and Shoulders, triangles, double tops, or bottoms. The basic concept behind pattern trading is that patterns with a history of success in the past are likely to recur in the future.

What distinguishes day trading from other strategies?  

When you trade within a day, you always have the main objective for your trading in mind (be it quick profits or long-term returns.) All trading activities should align with the final goal. 

Unlike long-term strategies, day trading requires you to be a regular, confident, and educated trader. You need to understand what instrument in what time can be the most profitable for you within minutes of your trades. The most profits in day trading will come after the right capital management and quick reaction to the market moves.

How to trade within a day?

First, you need to select instruments that align with your day trading strategy. These include assets with high liquidity and significant price movements: major or minor currencies (Forex), cryptocurrencies, some stocks, and future contacts (e.g., gold). 

Second, review economic and political news. Economic updates (e.g., NFP, CPI, or GDP) may influence the currencies you trade within a day, and political developments could make stocks volatile.

Third, choose the timeframe. Can you trade within a minute, or want to manage your positions within hours? This decision will define your approach.

Evaluate your risks and set Stop-Loss/Take-Profit. The best day trading strategy involves limitations: in time, instruments, and risks. Set your threshold in advance and put SL/TP orders to make your trading predictably profitable.

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