Five Tips to build the Best Day Trading Strategy

5 tips for building the best day trading strategy

When you are involved in buying and selling futures, forex or stocks every day (known as day trading) you need to develop your own winning day trading strategy. The best day trading strategy is one that helps you achieve your goals of making a profit from short term and long term transactions. The strategy that works well for another person may not work for you because of the differences in the types of assets and personality involved. The goal is maintain a steady growth of income and wealth through a methodical approach that is repeatable.

Getting started with a day trading strategy

Liquidity and volatility are two terms that have significance in trading for a futures, forex or stocks day trading strategy. Liquidity refers to the available funds to buy or sell an asset, and volatility refers to the range that is expected in price over time. The more volatility a financial asset has the better it is for you because you have a much better chance of being able to sell “buy low and sell high”.

Steps to building a day trading strategy

Before you invest heavily in the financial markets you should understand how a futures, forex or stocks day trading strategy works. You should spend some time following trends and focus on one or two instruments to determine how they perform over time. Once you feel comfortable that you have what it takes to build a trading strategy on your own, there are five simple steps you can follow:

1. Use a simple method that you find easy to follow. Don’t try to keep track of too many assets at once because you may get confused.
2. Based on the research you have done on the trends in day trading, look for opportunities and start with a long term chart for each one. The trends you should look for should coincide with the time frame you wish to trade.
3. There are times of the day when you should not engage in day trading. Lunch time is one of these times because this is the point at which traders sit back and take stock of what has happened throughout the morning. As you become accustomed to when prices rise and fall, you can develop a time when you get involved in the action.
4. Always be watching the charts for a break that you can jump on to make a profit. As a rule the best times to trade are between 9 and 10 in the morning and 2 and 3 in the afternoon.
5. Even though you may often sell right after buying, this is not always a practical solution. Be patient and let the trades come to you.