Day Trading strategy

Day Trading is an investment technique that comes to us directly from the United States, but is becoming increasingly popular in Europe. This trading technique is popular for its challenging aspect and profitability, the objective here is to make a long series of sales and purchases in one single day in such a way that all positions are closed before the end of the trading day.  

Day Trading strategy
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What exactly is Day Trading?

The Day Trading method therefore consists of making many small profits that are increased through the leverage effect and over a very short period of time. They are therefore based on the volatility level of the market. For this technique to function well, the profits are never large individually, generally offering around 1% on each transaction.

You must also accept that it may be necessary to sell at a loss if the markets are getting ready to close as you must not keep any positions open which may leave you vulnerable to extra risks. Here therefore, the objective is to make the maximum of profitable trades and a minimum of trades at a loss in order to end the day with a profit balance.

The Day Trading technique can appear profitable but it requires a certain amount of knowledge and a clear head to face the challenges as it is necessary to be available to pass orders in real time and resist stress and an overconfidence in yourself.


The conditions required to be successful in Day Trading:

Day Trading is a technique that requires a certain amount of preparation but also favourable market conditions. For example, it is only applicable to assets that have a high volatility and clear short term trends. The higher the volume traded on an asset, the stronger the volatility and therefore the better the Day Trading technique will work.

We therefore recommend that you opt for the more popular shares on the markets, those that have a large number of buyers and sellers.  Generally speaking, the shares quoted on the major stock market indices are choice assets for this technique. To maximise your chances, favour American indices that, as they are better known, offer a higher liquidity. Futures can also be interesting assets as they offer a high leverage effect which is ideal for Day Trading.


How much money should be invested in Day Trading?

In order that Day Trading is actually a profitable method, it is best to have a reasonable starting capital however this is not obligatory as high levels of leverage can be used. Even though, to minimise the risks incurred, try to avoid positioning yourself on too many assets at the same time and concentrate on just one or two.

Therefore you can only envisage a start in your Day Trading career if you have several thousand Euros in your investment account. Remember always to verify however that the spreads practised and other fees do not offset your profits.


Choosing the right broker to practise Day Trading:

To accomplish profits through Day Trading, it is important to carefully choose the broker you subscribe with. In fact, the various fees charged by certain brokers could interfere with your strategy by covering a too large part of your profits.  

You should therefore verify the spread levels used by the brokers before making your choice and always choose a broker that is inexpensive.  

Of course, the quality of the customer service and that of the platform itself should not be ignored. You will need an interface that is both efficient and rapid to ensure that your orders are processed at the exact right time. Ideally you should test your strategy using the demonstration accounts available with the majority of online brokers.


Some supplementary advice:

Here is some useful advice to help increase your chance of making profits with Day Trading: 

  • Isolate yourself as much as possible and avoid anything that could distract you.
  • Do not follow more than 4 assets at the same time.
  • Cut off your profits below 4%.
  • Cut your losses below 10%.
  • Take regular breaks to ensure you remain concentrated and do not give in to stress.
  • Do not trade for more than a few hours every day

In a general manner, it is best to practise and train first before placing all your money in Day Trading as although this method can prove highly efficient it requires a certain experience and great concentration, it is therefore not suitable for all traders.


How to analyse the markets to succeed in Day Trading?

The Day Trading method aims at speculating on micro-movements in the market, therefore information obtained from fundamental analysis is not used. On the contrary, it is better to use technical analysis using charts, particularly Japanese candlestick charts.

There are numerous technical indicators that enable you to identify the best moments to take position. These include support and resistance levels, gaps, or volatility analysis.

It is therefore necessary to have solid experience in the subject to become a successful and profitable Day Trader rapidly.


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Practise Day Trading online:

Now that you understand the advantages and functions of Day Trading do not hesitate to implement your strategies directly in real time on the financial markets by speculating online on various assets.

Try Day trading for yourself!
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