Intraday trading online is purchasing and selling financial instruments on the same day or numerous times with a single aim – to make profits. You can take the advantage of price fluctuations if you know how to make the most of small price moves.
That is why it is important for a beginner to understand intraday trading strategies. Putting a plan in place can help you define the entry and exit price, set a stop-loss, and book profits when the target is reached. Question is, where do you get started? The answer is this blog.
Top Strategies of Intraday Trading for Beginners
The internet can be a confusing place for learning new things with all kinds of information doing the rounds. If you’re on this blog, however, you’re at the right place because we’re going to discuss intraday trading strategies for beginners, starting with momentum trading.
1. Momentum Intraday Trading Strategy
Intraday trading for beginners is generally all about searching for liquid and solid stocks on a daily basis. These stocks may be prone to fluctuations in price which is called momentum.
Day trading is all about spotting the right share at the right moment, which is what the momentum trading strategy is about.
As a part of this strategy, you will need to choose the right stocks after doing an in-depth technical analysis by using technical indicators on charts, analyzing price and volume, and studying other important factors.
By knowing the volatility of the stock you can take short or long positions accordingly. If you need help with charts, check out this blog: How to Read Candlestick Charts for Day Trading?
2. Moving Average Crossover Strategy
This is one of the best intraday trading strategies for beginners. It is based on the simple fact that smaller moving averages follow prices faster than larger moving averages.
The assumption includes crossovers for simple and exponential moving averages.
Furthermore, when the crossover happens, you have a small trend formation until the reverse crossover happens. In simple terms, when the price of the stocks rises or falls below the moving average, it provides the signal for a reversal.
When you see the numbers go above the moving average, it is called an uptrend, and if the prices fall below the moving average, it is referred to as a downtrend.
This is affected mainly because of external factors or unpleasant news about the company or its financials. The key to this approach is picking stocks at the right moment.
3. Breakout Trading Strategy
This is a popular intraday trading strategy for choosing the right stocks. The major thing an intraday trader requires is to keep an eye on the stock prices.
When it increases or decreases below a certain level, it results in an unusual increase in the trading volume. Speed and observation play a major role in the breakout trading strategy.
Breakouts require quick entries and exits; it does not involve waiting. The intraday traders should compute the breakout price level and wait for the breakout to ensure risk management.
The reason is that it is relatively a risky strategy of trading as once the breakout ends, there is nothing left for buying.
For example, when the traders see that the prices are increasing, they can purchase the shares and sell them when they reach the target prices and vice versa if the stock price falls.
4. Gap and Go Trading Strategy
This is yet another online intraday strategy that is perfect for beginners. This strategy majorly focuses on gapers.
You must have observed that various stocks do not have pre-market volume, but they open at a gap compared to their previous day’s prices.
There can be various reasons for such gaps, such as earning announcements, news hikes, changes in the trading strategy of traders, etc.
If you see that the gap opens higher, it is called gap up, and if it’s less than the previous day, it is called gap down.
These gaps can usually be seen in the opening hour of the market when the demand and supply are high. This is one the intraday trader needs to enter before the gap gets balanced to make a good profit.
5. Pullback Trading Strategy
This is a great intraday strategy for beginners as in this, they need to enter the stocks during correlations or pullbacks.
Pullback happens when you see that the movement in the stock happens in the reverse direction of a long-term trend.
The major benefit of this strategy is that it saves traders from losing if they are going by the trend.
Thus, when you see that a stock is in an uptrend or a downtrend, it will make small moves in the opposite direction of the major trend.
We’ve covered some of the best intraday strategies for beginners that are used by traders of varying expertise. Every trading strategy has its pros and cons.
The intraday strategies mentioned above are not any different. That’s why you must trade based on what works best for you in line with factors like affordability and risk appetite.