Standard Strategies Used by Day Traders - dummies

Standard Strategies Used by Day Traders

Many day traders work out their own systems and trading strategies after they’ve been trading for a while, but they often start with something standardized. You can start trading in a lot of ways. There are a few basic styles that you can use to launch your trading business. All the strategies are based on market indicators. They include:

  • Range trading, or working within normal high and low movements;

  • Contrarian trading, or going against the momentum;

  • News trading, or looking to buy and sell as soon as a juicy tidbit comes across the newswire; and

  • Pairs trading, in which a trader goes long a strong stock and short a weaker one in the same category. The idea is that in an up market, gains on the long will outpace losses on the short, and in a down market, gains on the short will outpace losses on the long.

No one of these strategies is better than another. Each has advantages in different market conditions. The key is finding a strategy that fits your temperament and style so that you can act on it. A strategy is only as good as the trader who executes it.

Many brokerage firms offer practice accounts and back testing services that you can use to play around and see what fits. And then you can start working with real money.