In trading, there is no trading style that is suitable for everyone. There are many types of trading such as Position Trading, Swing Trading, Scalping, etc. Some traders will prefer low time frames and others will prefer long time frames. One of the short-term trading methods is Day Trading. In this article, together with How to trade, let’s find out what Day Trading is.
What is Day Trading?
Day Trading is a short-term trading method. Orders are completed during the day, not overnight. This is almost similar to Scalping, but with less transactions, not continuous like Scalping. If you choose Day Trading as your trading style, you will become a Day Trader.
Characteristics of Day Trading
You will mainly trade in short waves during the day.
Technical analysis will be the type most used by Day Traders. It is for identifying trends because transactions are mostly short-term.
Day Traders often have to observe the chart as well. This is to look for entry opportunities just like Scalping.
Since this is short-term trading, Day Traders will also open many orders per day. The number of orders depends on the profit target of each person. However, the average is 3-30 orders.
A lot of people confuse Scalping and Day Trading methods. Both are short-term trading, but Scalping is a flash-based trade with M1, M5, and M15 candlesticks. The amount of profit earned will be less than Day Trading.
Minimize the risk of irregularities occurring. Trades are completed within the day. When the world is volatile with a lot of news, your orders are mostly not affected, since they are all finished for the day.
Profits are stable and firm. Because all transactions are “closed” quickly within the day. So you can always sum up how much profit you get.
You will need a sizable amount of capital as a Day Trader. Often traders will not expect too high on each trade because of the profits earned on short-term orders. Therefore, you need to have a fair amount of capital to get an attractive profit thanks to “many a little makes a mickle”.
What do you need to conduct Day Trading?
As mentioned before, Day Trading is trading during the day. For that reason, sometimes the news will not affect your order as much as if you trade the long term, even though they are of great importance.
Therefore, you should try to study knowledge well so that you can examine the chart for yourself, and predict the price trend of the asset being traded. This will make it easier for you to succeed. Here is what it takes to become a professional Day Trader.
Know how to manage capital closely
This is extremely important. If you do not comply with the stop-loss and take-profit or follow the plan you have outlined, it will be difficult for you to generate profits as well as reduce your risk.
Track the daily economic calendar to capture market trends
While technical analysis is important in Day Trading, that doesn’t mean you don’t need to follow the news. Updating daily news is very necessary, especially the economic calendar because, during these times, the market is very volatile. You can choose other time frames to trade to avoid risks occurring.
Always keep an eye on the chart
Day Traders should keep an eye on the chart regularly to capture the price movements. If you are working in other full-time jobs, you can schedule your transaction time by one of the three Asian, European, and American sessions. Choose which one suits you best. You don’t necessarily find a way to trade all day. This will cause stress and affect your psychology and your health.
Basic strategies for Day Trading in Etoro
Once you have chosen the Day Trading style, use a technical analysis indicator to find short waves and shape your way of trading during the day. After knowing the short-term trend of the day, you need to choose a reasonable entry point.
Instructions on Day Trading with Bollinger Bands indicator
Conditions: Set up the Bollinger Bands indicator in Etoro. Daily Japanese candlestick chart or lower time frames.
Open a BUY order when: The price penetrates and completes a candlestick outside the lower band.
Explanation: When the Japanese candlestick chart is out of the lower band, the possibility of the candlestick getting back into the bands is very high. The moment when the candlestick closes out of the lower band is safest for opening a BUY order.
Open a SELL order when: The price breaks out and completes a candlestick outside the upper band.
Explanation: When the Japanese candlestick chart closes out of the upper band, there is a high probability that the price will get back into the bands. When the candle closes out of the upper band, this is an opportunity to open a safe SELL order.
Instructions on Day Trading combined with Resistance/Support
Conditions: Daily Japanese candlestick chart or lower time frames.
Open a BUY order when: The price hits the support zone.
Explanation: The market will usually rebound when the price enters the support zone. Right there, you should place a BUY order to expect the price to rebound.
Open a SELL order when: The price enters the resistance zone.
Explanation: Most of the time, when the price hits the resistance, it bounces back lower. When the price enters the resistance zone, it is time to consider opening a safe SELL order.
Things to note when day trading
– Choose platforms with low transaction fees. This is a big problem for Day Traders.
– Learn how to control your emotions well as a Day Trader.
– It takes a lot of time to observe price movements.
– Need to start with big money.
When you are ready to be a Day Trader, it is important to be aware of the above considerations. Do not let seemingly small things be an invisible barrier in the trading process. You need to grasp news quickly and feel price movements to have highly profitable investments.