There are many different day trading strategies that momentum traders use. Techniques include the gap and go, red to green moves, ride the 9, dip buy reversals, and short. These are day trading strategies that work. That doesn’t mean you must be good at each trading style. Each trader has their trading preference. The gap-and-go strategy is probably the most popular day trading strategy. It entails gapping stocks in the premarket where the price is gapping up above the previous close price.
Table of Contents
Day Trading Strategies for Beginners
- Gap and go
- Red to green moves
- VWAP crossover
- Dip buying bounces off moving average lines
- Shorting reversal patterns
- Buying stocks at momentum breakouts
- Purely trading price action
- Heikin Ashi Trading Strategy
- Ichikmoku cloud trading
- Momentum bull flag strategy
Before we break down day trading strategies that work, it’s really important to know the brutal truth about becoming a day trader: It’s HARD! Learning how to trade penny stocks will become one of the hardest undertakings of your life.
Ok, so it’s time to scare you more. The failure rate as a momentum trader is over 90%! That’s right…you’re joining an industry where the odds are stacked against you. This is a good post if you’re looking for day trading secrets. You’re about to join a club where you’ll be trading against the best traders in the world. Don’t let that discourage you.
Now that we’ve gotten the tough love out of the way let’s talk a little about day trading strategies for beginners.
If you want to become successful, one of the most important things to remember is that proper risk management strategies will be the key to your success. Ideally, you want to have at least a 2:1 profit/loss ratio. Never risk more than you can potentially make!
What Is the Best Strategy for Day Trading?
1. Gap And Go
Undoubtedly, the gap & go is the best strategy for day trading! How it works:
- Hunt for gapping stocks with a minimum of 3% gain pre-market
- Watch for breakouts on daily charts (news is one of the best breakout catalysts)
- Yearly or all-time highs create huge breakouts
- Low floaters create the biggest volatility spikes
- Look for high relative volume
- Watch for multi-day runners after a daily breakout
- Keep an eye on the shorts after 3+ consecutive green days
If you’re looking for successful intraday trading strategies, looking for chart setups with potential daily breakouts is best. They usually happen with daily breakouts.
The gap and go strategy is probably the best intraday trading strategy. The reason why this strategy is so popular is when a stock moves pre-market, there’s a chance that it might run at the open. Hence, the term gap and go. A stock is essentially gaping above the previous day’s close price.
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3. VWAP Trading
Vwap is another important day trading indicator that many traders pay attention to. It’s right up there with ema’s and sma‘s. Check this $ROKU VWAP trading setup from this year. There are pretty solid entries and exits if you follow VWAP and VWAP alone.
4. Ichimoku Trading Strategy
Believe it or not…many traders use the Ichimoku Cloud Trading System for one of their solid day trading strategies. It’s a simple-to-use system with clear entries and exits you can spot.
Foundations of Successful Trading
1. Order Entry
Limit orders are much safer to use than market orders when stock trading. They protect your entries and exits, whereas market orders are much riskier because you don’t know what your fill will be. Levels 1 & 2 and time and sales show the breakdown of buyers vs. sellers. They have a symbiotic relationship and work in partnership with each other. Always be aware of how many buyers and sellers potentially want to enter and exit a trade.
Lots of manipulation happens with level 2, so always monitoring time and sales is important. Time and sales are buyers and sellers and where they bought or sold. The Level 2 data is real, but it does not mean many buyers or sellers want to buy or sell. It could be just Algo’s (computers) playing games or traders setting bait.
Exponential moving averages and simple moving average lines are important indicators that traders pay particular attention to. They tell an important story on all chart time frames.
One of the best day trading secrets we can give you is watching for the 9/20 ema crossover. If the nine ema points upwards and pushes the price up, you could ride the 9.
Final Thoughts on Day Trading Strategies
You spend time and effort learning day trading strategies that work. Above, we’ve mapped out different strategies you can focus on. You don’t need to be good at all of them. Pick one and learn it inside and out. Then you’ll be successful at it.
Frequently Asked Questions
Day trading strategies that work include, but aren't limited to, the gap and go strategy, red to green move, and moving average cross.
If you want a simple day trading strategy, trade using support and resistance with candlesticks. This is also known as price action.
You can day trade with $1,000, but it could be not easy depending on what you're trading. You'll need to ensure you're good at your chosen strategy because it's easy to blow up your account.
If the market hasn't reversed up or down by 11 am, then the direction for the day is most likely set. However, breaking news and/or FOMC can change that.