As people were stuck inside quarantined during the pandemic, many left with only a portion of the income they normally would receive. So they looked for other ways of earning money from home – one of the most popular ways – online day trading stocks.
According to earnings releases from several prominent brokers, individuals have begun day trading at record levels. TD Ameritrade added an impressive 661,000 new retail accounts in Q2. Social investment platform eToro has also been very active on their official eToro Facebook and Twitter accounts posting their milestones of bringing in more clients to their network.
The problem is – most day traders end up losing money because they don’t have a strategy in place.
Are you thinking of day trading? Here are some of the best day trading strategies to get you started on the right path.
- Scalping
Arguably the most popular day trading strategy is what is known as scalping to professional day traders. Scalping stocks involves taking advantage of small changes in price and cashing out quickly to avoid excess risk.
The idea behind scalping is stock prices increase but don’t always follow through, so it’s important to take profits while you have them. The scalping strategy requires a great deal of discipline – you must have entry and exit points. Otherwise, one significant loss can wipe out your account.
Scalping also requires certain tools, like a trading platform that supports day trades. It’s critical to research beforehand and decipher the best day trading platform for your needs.
- Options Trading
Stock options are considered a derivative because the price is derived from the underlying equity. Option prices can change in a blink of an eye and require traders to pay close attention.
When it comes to options trading, there are two choices:
- Calls
- Or Puts
Individuals will purchase calls when they expect the price to increase and buy puts when they expect the price to decrease. Trading options can be fairly complex. It’s recommended to start with a little amount of capital to lessen your risk of losing a significant portion of your investment.
- Range Based Trading
When looking at a stock chart, it may just look like a bunch of lines at first, but stock traders use charts to determine levels of support and resistance.
A support zone is where the price of a stock falls, and investors will typically buy more at that price. Resistance is where a stock price tends to fail when advancing. One of the most helpful tips for day trading is having a plan set before entering a trade and following through with the plan.
- Arbitrage
By definition, arbitrage is buying and selling an asset at the same time on different exchanges to profit from the difference. If timed correctly, the trade will result in “riskless” profit, however, these opportunities are difficult to find.
When it comes to arbitrage trading, be sure you are taking into account transaction fees, as these can add up and result in a loss.
- Fading
Fading is an advanced trading strategy that involves shorting a stock after a significant price increase.
Many times contrarian investors will use a fade strategy when they feel the stock price is overbought. Fading can be extremely risky and should be used cautiously as traders can end up on the wrong side of a trade.
Wanna Learn More About the Best Day Trading Strategies
Anyone can begin day trading, but not everyone is a day trader. One of the major differences between the two, day traders have a plan that they abide by that keeps them disciplined. Consider starting one today and get on the right path towards profitability.
If you would like to learn more about the best day trading strategies, check out the rest of our website!
