Pro Day Trading Strategies & Insights

Day Trading Strategies are used by investors to remove or limit overnight exposure, which can be seen as an additional risk to their capital. Though in truth this is less of an issue when trading Forex (where the market is open 24 hours a day five days a week) than it is for other asset classes.



Nevertheless following a Day Trading Strategy allows a trader to end their business day flat. That is with no open positions. Thereby avoiding unpleasant surprises (that may result from negative overnight moves) when he or she returns to their trading screen the next day. By the same token of course they run the risk of missing out on any positive moves overnight, though this is seen as the lesser of two evils so to speak.


Increasing popularity

Day Trading Strategies became popular among the investing public in the internet boom of the late 1990s. As people’s houses and places of work were connected to the internet,so they were able to view and interact with information in real time. One of the most obvious things that individuals could interact with over their new internet connections, was financial markets data. As a result an increasing number of individuals decided that they wanted to take control of their investments and trade for themselves. A new generation of brokerage companies were founded to meet these new customer requirements of which Blackwell Global is one.


Anatomy of Day Trading Strategies

Day trading activity takes place intraday – that is inside one business day. Traders may buy and or sell numerous financial instruments in that time, but they will aim to end the day with out any open positions, having” squared their books” before the close of business. Those investors implementing Day Trading Strategies may finish the trading day well before the official close of business. If for example they employ monetary targets, as a far as profit and loss are concerned. For example if a trader has a profit target of £1500.00 per day and a maximum daily loss of £500.00, if he or she reaches or exceeds either of those figures, they could well decide to cease trading for that particular day. Rather than risk their profit or incur further losses.


Examples of Day Trading Strategies



Both Scalpers and Swing Traders use Day Trading Strategies. Scalpers are frequent traders who hold a position for a very short time, while looking to collect or scalp a small profit from each trade they do. Or at worst to close a non performing trade for little or no loss. Over the course of a day they hope to achieve many more winning than losing trades, or to have winning trades whose cumulative profits exceeds their total losses, plus any costs incurred. A simple Day Trading Strategy that might be employed by a Scalpers is to monitor how a price respects a moving average, over a relatively short time frame. For example a 10 period moving average plotted on a 15 minute chart.


We can see an example of this in the chart below, which is a 15 minute plot of EUR USD (Euro US Dollar) that has been drawn with a 10 period simple moving average in yellow (this line is quite simply the plot of the rolling average of 10 periods of price activity). You can see that we have highlighted two areas within the chart. On the left hand side an area where the price of EUR USD was unable to break above the 10 period MA line and having tested there,moved lower. The white or filled candles here indicate a 15 minute period,where the closing price in the period, was lower than the high.Which itself was often at or close to the 10 period ma  line. Each of these failures at the moving average represented an opportunity to short (Sell) EUR USD as part of a Day Trading Strategy.



Conversely to the righthand side of the chart we have highlighted an area where the EUR USD price viewed the moving average line as short term support. The price touches but does break below the ma  line on consecutive occasions. Then the price subsequently moves higher away from the line, before breaking below once again on the third test of the line. These bounces away from the moving average would have provided an opportunity to get long or buy EUR USD, whilst the break below the MA would have signaled the end of the short term price support. Note though that the price goes on to test at and bounce from horizontal support and then moves back above the moving average once more. This type of short term price action creates a useful Day Trading Strategy that is exactly type of thing Scalpers can and do exploit.


Day Trading Strategies for Swing Traders

Swing Traders take a longer term view than their Scalper counterparts but many of them will employ a Day Trading Strategy, to mitigate their overnight risk exposure. Swing Traders are looking to identify swings or changes in price momentum. And once identified to capture as much of a move as possible within a trade. The chart below shows the UK 100 stock index drawn over hourly time frame.