How To Find The Best Day Trading Strategy
One of the best ways to increase the chances of success with trading is for a trader
to try and match their own individual personality with the specific techniques employed in the field.In layman's terms, day trading involves the buying and selling of securities on the same day, and traders who are involved in this practice are usually referred to as being active traders or day traders. In the past, day trading was usually reserved for financial institutions, investment companies, banks, and fund managers. However, with the arrival of online day trading, this field of business has by all accounts become available to practically anyone wishing to become involved with day trading.
The Various Strategies Employed
As you can well imagine, there are nowadays a variety of strategies and techniques being used by active traders in order to ensure they can benefit financially. These include:
News playing, Trend following, Rebate trading, and Contrarian investing
Contrarian investing is basically a form of day trading which follows the ideology that those securities which have been rising steadily, will eventually begin to fall. If securities have been falling, then the exact opposite view is applied.
News playing is a technique which relies on buying and selling securities based entirely on news which has been released by the specific company.
Rebate trading is another popular strategy which uses ECN rebates as the main source of income. Generally speaking, traders who use this strategy will usually purchase low priced securities in vast quantities.
Scalping on the other hand involves establishing and liquidating financial securities in a very short space of time. In fact, it is not uncommon for traders who follow this route to purchase and sell securities within minutes, or even seconds.
Trend following is basically the exact opposite of contrarian investing, in that traders who use this strategy will usually assume that rising securities will continue to rise, while falling securities will continue to fall.
Other popular trading strategies include the likes of Short Sells and Range Trading.
Determining What The Best Strategy Is
Interestingly enough, statistics seem to suggest that approximately 80% of traders end up losing their available capital even before they've managed to learn about the various strategies. This is exactly why it's so important to begin slowly, and to only take small risks in the beginning. Likewise, it's of paramount importance to find the ideal strategy so that a profit can be made. Below are a few tips regarding how one should go about finding the right trading strategy.
Matching the right strategy with the right trader - one of the most important things to bear in mind is that it's essential to match a trader's individual personality, their strengths, and also their comfort level, with the correct strategy. In other words, those who feel uncomfortable taking risks should rather consider scalping or news playing, rather than becoming involved with contrarian investing, which for the most part is best suited to those who are willing to take risks.
Starting small and testing the water - ideally, you should begin by making small investments if you're new to the game, as this will allow you an opportunity to learn all about the different pros and cons of a specific strategy.
Day traders can also benefit from using more than one strategy at a time. For example, a trader could consider investing the majority of there capital using a low risk strategy, while at the same time investing a small portion of their capital using one of the higher risk categories such as contrarian investing.
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