A day trader spends most of his or her time studying and monitoring the markets. One of the goals of the strategy is to buy assets at a low price and then sell them at a profit, and then do this again and again until they make a profit in a single day. An education in finance and investing as well as market experience are crucial.
1. Breakout Trading - Many traders believe that stocks move within a range of prices. If a value moves above or below that range, a day trader may decide to buy or sell.
2. Pullback Trading: This strategy seeks opportunities to profit from price drops within a long-term trend. As most stocks rise in value, market dips can provide an opportunity to buy shares at a lower price and then sell when the value rises again.
3. Scalping - Making multiple daily trades that result in modest gains. Trading occurs so fast with this method that day traders hold onto these stocks for seconds to minutes. Trading in large quantities is the key to success with this method.
4. Range Trading - This tactic is similar to breakout trading. As opposed to waiting for stocks to go above or below the predicted range, day traders will buy and sell as soon as the price is close to the range's boundaries.
5. Traders monitor the news for developments that may affect the price of equities. As investors, they must constantly monitor news channels for information that can be used to forecast how stocks will perform and make decisions based on that information.
6. The term high-frequency trading refers to trading assets in large quantities as quickly as possible using automated algorithms. Institutional investors often perform this type of day trading because it requires specialized computer systems.