5 Day Trading Strategies You Should Know
Breakout Trading Strategy
Breakout strategies explain about the price movements at a specified level on your chart, with increased volume. The breakout trader trades enter into a long position of the FX pair after it breaks above resistance. Alternatively, you enter a short position once the pair breaks below support.
After a pair trades beyond the specified point, volatility usually increases, and prices will often trend in the direction of the breakout.
However, you need to find the right instrument to trade. When using this strategy bear in mind the FX pair’s support and resistance levels. The more frequently the price of currency pair hit these points, the more validated and important they become.
Entry points are nice and straightforward. Price of a currency pair set to close and above resistance levels require a bearish position. Price set to close and below a support, the level needs a bullish position.
Plan your exits:
Use the currency pair’s recent performance to establish a reasonable target. Using chart patterns will make this strategy even more accurate. You can evaluate the average recent price swings to know the target. Let’s suppose, the average price of the pair swing has been 3 points over the last several price swings, this would be a sensible target. Once you have reached that goal you can make an exit trade and enjoy the profit.
Scalping Trading Strategy
Scalping is one of the most useful trading strategies among FX traders. It is mainly popular in the forex market, and it looks to capitalize on minute price changes of the currency pair. The driving factor is quantity. You will look to square-off the open order as soon as the trade becomes profitable. This is a fast and exciting way to day trade, but it can be risky. You need a high trading possibility to even out the low risk vs reward ratio.
Momentum Trading Strategy
A momentum strategy is popular amongst the beginner traders, this strategy is based on news sources and identifying trending moves with the support of high volume. There is always at least one currency pair that is highly volatile to trade, so there’s ample opportunity. You simply hold your position until you see signs of reversal.
Instead, you can fade the price drop. This way your target is as soon as volume starts to weaken.
This trading strategy is simple and effective if used correctly. However, you must ensure you’re aware of upcoming news and major announcements.
Reversal Trading Strategy
Reversal trading strategy is potentially dangerous when used by beginners. It is used all over the world by expert FX traders. It is also known as trend trading, pull back trending and a mean reversion strategy.
This strategy confronts basic logic as you aim to trade against the trend. You need to be able to accurately identify possible pullbacks, plus predict the current strength of the currency pair. To make a profitable trade you need in-depth market knowledge and experience.
Moreover, the ‘daily pivot’ trading strategy is considered a unique case of reverse trading, as it centers on buying and selling the daily low and high of the FX pair.
Using Pivot Points
A day trading pivot point strategy is a trading tool for identifying and acting on critical support and resistance levels. It can be used by range-bound traders to identify points of entry, while trend and breakout traders can use pivot points to locate the key support and resistance levels that need to break for a move to count as a breakout point.