Day trading isn’t only a vague idea of trading quickly or something along those lines. Day trading is a complete, defined, and useful strategy that many traders use to gain some profits out of the financial markets.
However, if you’re a beginner, we understand that you wouldn’t be able to grasp the whole concept quickly. That’s quite okay, because in this article, we’re going to tell you all the things you need to know about the types of day trading and what things you should consider if you want to try this trading style.
So hop in, and learn more by reading this Forex Trading Guides and News. Here are the types of day trading.
Trend trading involves the process of looking at a long time frame chart and spotting the overall trend via that chart.
After you have established the overall trend, you then move to a smaller time frame chart, searching for trading opportunities in the direction of that trend.
You can use indicators on the shorter time frame chart to get some clues about when to time your entries. The indicators will also help you confirm the overall trend you think you’ve spotted.
Countertrend trading is much like trend trading in that you have to first determine an overall trend on the chart. The difference is that, as the name suggests, after you determine the overall trend, you then search for trading opportunities in the opposite direction.
The idea behind this strategy is to spot the end of the trend and then get in as early as possible when the trend reverses. As you may have guessed, this strategy is a little bit riskier. But remember that in general, higher risks mean higher rewards.
Breakout trading is looking at the range that a currency pair has made during specific hours of the day. After that, you place trades on either side with the view to catch a breakout on either direction.
You can see that this strategy can be effective when a pair has been a tight range, which is usually a signal that the pair is about to make a big move. The trick here is to set yourself up in a manner that when the big move happens, you’re prepared to ride it.
In breakout trading, you have to spot a range where range and resistance levels have been holding strongly and entry points above or below those breakout levels.
The Things to Consider
When you’re a day trader, no matter which style you pick, you will always have to consider different important things.
You have to stay updates on the latest fundamental events, which will guide you throughout your trading career. Follow different news websites that track economic news so that you can always see the bigger picture of the landscape. It may even help you be one step ahead of the game.
Another thing to consider is that time you can spend on day trading. If you are up to other things like a full-time job, you may want to consider how much time you can spare for analysing, executing, and monitoring your trades.