In order to generate a profit in share trading, day traders focus on taking advantage of small price fluctuations in specific assets. They typically do this by using a lot of borrowed money. For a typical day trader, there are three things he or she looks for before making a purchase:
Liquidity
The ability to acquire and sell a security quickly and profitably is one of the hallmarks of liquid security. There are many advantages to liquidity, including low slippage.
Volatility
Here, the price range is defined as that in which day traders are most likely to operate. Increasing the degree of uncertainty increases both the potential for gain and the risk for loss.
Volume
Volume is defined as the number of times a particular stock is sold or bought in a specific period of time. Average daily trading volume (ADV) is the term used to describe it. A stock with a high volume suggests a strong level of interest. A price increase or decrease can often be predicted by an increase or decrease in the volume of the stock.
When Is the Best Time to Purchase?
To get started, you need to know which stocks you wish to trade. The following are some of the tools you can use:
Real-Time News: It is important because it gives you an update on the latest news that may have an effect on the market.
Using candlestick charts, traders may get a firsthand look at the price activity of the day. There’s more to come.
Make a list of the criteria under which you intend to accept a job offer. Buying during an uptick, for example, is too general.
Buy when the price breaks above the upper trendline of a triangle pattern, if the triangle was preceded by an uptrend in the first two hours of the trading day on a two-minute chart. This strategy is more specific and testable.
The more charts you scan, the more likely it is that your entry rules are being met. Check to see if a candlestick chart pattern indicates a move in price in the direction you expect. This could be a good starting point for your strategy.
The next step is to figure out how to exit your positions.
Choosing the Right Time to Sell
Trailing stops and profit goals can be used to exit a winning position in share trading. The most popular form of exit is to set a profit target. At a pre-determined price level, they’re talking about profiting from the investment. Following are a few examples of frequent methods for achieving profit goals:
When it comes to trading, scalping is a common method. It entails selling a position as soon as it turns a profit. The price objective is the amount you need to invest in order to profit from the transaction.
Profiting from the daily volatility of a stock is the goal of this method. You try to buy at the day’s low and sell at the day’s high. The price goal is simply the next indication of a reversal in this case.
In order to use this approach, you must look for significant trending moves supported by big volume, rather than trading off of news releases. Some traders use news releases to buy stocks and ride a trend until it starts to reverse. While a different type will dampen the price increase. When volume begins to decline, this is the price target.
