Where can I get intraday strategies
How does intraday trading work on the stock exchange?
What is day trading or micro trading?
Before we get to the strategies that are suitable for short-term trading, let's first take a quick look at what day trading or micro trading exactly is.
Day trading is an investment method in which you buy and sell positions on assets within one and the same trading day. It is therefore important that all positions are closed at the end of each day. As part of this method, you open and close a large number of positions within one trading session. The goal is to use small price fluctuations, i.e. to rely on the volume and not on the duration.
Micro-trading is about the same, because as the name suggests, it is about trading with micro-movements, i.e. with price fluctuations within a very short period of time.
However, these investment methods - also known as intraday trading - are reserved for traders who can spend a lot of time investing in the financial markets. If you only speculate for a few hours a day, it is not possible to use the appropriate strategies. A day trader not only needs time, but also concentration, dedication, nerves like steel and extensive knowledge of the stock market, technical analysis and fundamental analysis. In order to speculate with the help of day trading or micro trading, one must be able to place orders quickly and react immediately to the smallest price fluctuations.
Since it is a matter of trading a large number of positions with small price differences, one starts with developing a precise strategy that takes personal goals into account.
Day trading or micro trading are therefore investment methods that are clearly different from long-term trading, because long-term trading is about holding an asset or position for several days, weeks, months or even years.
Factors to consider when trading intraday
If you want to invest using the intraday method, you should know and consider a few factors. Most classic investments are long-term and fluctuations in exchange rates over the course of the day have little impact on global strategy. If, on the other hand, you speculate with methods such as day trading or micro trading, you should know the factors that have a decisive influence on the behavior of the stock market.
For example, one of these elements is market liquidity. It depends on how easily and quickly you can close an opened position. Assets with high liquidity have more market participants looking to buy or sell that asset than assets with low liquidity. Orders are therefore executed faster, a factor that is crucial in intraday speculation.
The volatility of an asset or market is another key element as it determines the speed at which prices change. The higher the volatility of an asset, the more price fluctuations it will experience over a short period of time.
You should also know the trading volume for the assets you are considering. This volume indicates how many of these assets will be bought and sold in a given period of time. An asset with a high trading volume is interesting in the eyes of investors.
Investors who speculate using the day trading method usually do so with assets that meet these criteria, i.e. that have high liquidity, pronounced volatility and a high trading volume.
Which intraday strategies are most commonly used for micro-trading or day-trading?
Day trading and micro trading are types of investment, but not trading strategies as such. The following gives you an overview of which trading strategies investors use most for intraday speculation.
- Trend following is one of the most popular strategies for day traders. In this case, you analyze the direction that the price of an asset is taking and buy or sell positions based on this trend. As part of a trend following strategy, you draw a buy position if you identify a clear bullish trend, or a sell position if a clear bearish trend is emerging. This strategy is not exclusively reserved for intraday traders, it is also used for longer-term positions. There are traders who keep a position open as long as a certain trend continues. In the context of day trading, however, you have to close this position before the close of trading.
- Swing trading is another popular strategy for day trading. This strategy uses short-term price fluctuations, but at the same time takes into account the fact that a price never moves exclusively in the same direction over the course of a certain trend. A swing trader therefore seeks to benefit from both upward and downward price movements over a short period of time. The swing trading strategy is only suitable for short-term trading. Swing traders focus on small changes in the trend of an asset. For this strategy one should of course be able to recognize such trend reversals in advance.
- Now we come to the scalping strategy. Again, this is a trading strategy that is suitable for short periods of time. Your goal is to add up lots of small winnings. In this case, the rate of the positions successfully written is decisive. Scalping is about writing many positions within one trading day, i.e. processing many transactions on small price fluctuations (with small price differences). It is therefore not a question of letting profits run. A characteristic of scalping is a strict and reactive exit strategy, otherwise losses can quickly outweigh gains. While scalping is not exclusive to intraday trading, most investors who use this strategy close their positions before the close of trading to avoid overnight costs.
- The last intraday strategy we mention in this overview is the mean reversion strategy. This strategy is based on the theory that prices and other metrics (such as the price-earnings ratio) tend towards a mean over and over again. The strategy of returning to the mean is therefore essentially based on data from technical analysis and indicators resulting from it, such as moving averages. With their help, assets are to be identified which in the recent past have moved far away from the historical average price and which may return to this level. So the point is to take advantage of the moves back towards the historical mean.
Risk management as part of intraday strategies
As mentioned briefly above, Intraday trading is a risky investment method that requires extensive knowledge of the stock market, analytical skills and experience with online investments.
Risk management is extremely important in this context, so that day traders generally develop a proper strategy for their risk management, with the help of which extreme situations are to be avoided and possible losses to be minimized. Risk management can mean, for example, that specific orders such as Stop orders or limit orders to be placed. Numerous online brokers offer such options. Such orders can be used to automatically close a position when a predetermined loss has been reached.
The ability to limit losses in the event of a false trend forecast is a necessary prerequisite for any trading strategy, but is even more important in the context of short-term strategies such as day trading or micro-trading. Here, too, experience often makes the difference. In this respect, investments in intraday trading are reserved for experienced traders who do not make the mistake of running losing positions because they are still hoping for a trend reversal.
The best way to successfully control risk is to adopt a strategy accordingly. The development of such, however, requires the ability to determine the profit-loss risk depending on the available capital and your own investment profile. The fact that experience is particularly in demand here is due to the fact that it takes time and practice to really assess such risks correctly.
The leverage in the context of the intraday strategy
Finally, one more important point about a tool that is often used in intraday trading, but one whose high risk it is essential to be aware of: the leverage.
Many traders who start with day trading or micro trading are tempted by this feature, as it multiplies the amount invested in a position, so that one can achieve more interesting profits even with small price differences. Indeed one should exercise the utmost caution with this tool, because the losses are also higher.
We therefore advise you to avoid using leverage as much as possible, regardless of whether it is a short-term or a long-term position. Always keep that in mind trading, no matter what method or strategy you use, involves risk and that you are putting your capital at risk with every position you write.
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