♞ COMMON STOCK DAY-TRADE STRATEGIES 

Day trading is a very challenging and time-consuming practice that suits only a specific type of trader with the necessary skills and discipline. Day traders should focus on strategies that match their risk profile and always use specific setups.

These are some important things to remember:

☑️ Test your skills and setups extensively on a demo account, as 90% of beginners lose their capital within the first 90 days without practice.

☑️ Identify and follow strong intraday trends at their early stages.

☑️ Let your profits run and use trailing stops to lock them in.

☑️ Smart traders always use stop-loss orders and place them carefully below key support levels.

☑️ Avoid overtrading and never risk more than 2% of your trading capital on a single trade (for example, $100 potential loss on a $5,000 account).

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Here are some common day-trade strategies for trading stocks and indices.

1️⃣ Momentum Day-Trade Strategy

• Goal: Profit from strong trending markets.

• Objective: Buy after favorable news, sell when the trend shows signs of reversal.

• Setup/Tools: Enter when RSI > 50, stochastic rises, and 5-period SMA crosses above 10-period SMA. Exit using a trailing stop-loss to lock gains

A momentum day-trade strategy works in markets with strong trends. A momentum trader usually buys a stock after favorable news and sells it when there’s a clear sign of trend reversal.

📌 Tip: A trailing-stop order can be useful for this strategy.

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2️⃣ Trend-Exhaustion Day-Trade Strategy

• Goal: Trade against rapid upward or downward moves.

• Setup/Tools: Fibonacci retracement and/or RSI on M5 timeframe.

• Note: High risk, but can be profitable if executed wisely.

This strategy targets stocks or indices that make rapid upward or downward moves. You place trades against these rapid trends. Although risky, it can be profitable if executed wisely.

📌 Technical Analysis Tip: Use RSI Precision on the M5 timeframe: 🔗 RSI Precision v.3 (Multisignal Indicator)

• Buy if RSI Precision is below 30 and starts rising ⬆️

• Sell if RSI Precision is above 70 and starts falling ⬇️

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3️⃣ Scalping Day-Trade Strategy

• Best For: Assets offered in very tight spreads, like popular stock indices.

• Goal: Make small profits quickly.

• Setup/Tools Use MACD + Parabolic SAR; long entry when MACD crosses above zero with ≥3 Parabolic SAR dots below candles.

Scalping involves buying an asset and selling it quickly for a small profit, often closing the position almost immediately after it becomes profitable.

📌 Tip: You need a Direct Market Access broker to scalp the market effectively, and you should focus on trading only assets with very tight spreads, such as blue-chip stocks or stock market indices. Avoid scalping the stock market using CFDs.

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4️⃣ Short-Selling the Stock Market

• Goal: Profit from falling stock prices.

• Process: Borrow a stock, sell it, then buy it back later at a lower price.

• Alternative: Use standard options instead of directly shorting the stock.

Short-selling is predicting that a stock’s price will fall. Instead of buying, you borrow the stock and sell it, hoping to buy it back later at a lower price.

📌 Tip: Standard options on the stock can also be used instead of directly selling the stock.

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📝 Margin Trading -How to Leverage your Stock Trades

When trading stocks, you can borrow money from a margin account. A margin account usually requires an initial investment of at least $2,000. For options, the minimum initial investment is $250. Once your margin account is open for stocks, you can borrow up to 50% of your portfolio. This 50% borrowing is called a margin. Be careful—margin accounts increase both market risk and trading costs.

Alternatively, instead of buying a stock, you can buy an option or a futures contract based on the stock’s price movements. The risk is similarly high, so make sure you use proper money management.

A Margin Call

A margin call occurs when a broker finds that your margin account has fallen below the required maintenance margin. Then two things may happen:

1. You must deposit more money to cover the margin call.

2. If you don’t, the broker can sell your securities until the maintenance margin is restored.

Under most margin agreements, the broker can sell your securities immediately without waiting for you to meet the margin call.

🔗 More: » Arbitrage Equity Trading Strategies

 

■ Equity Day-Trade Strategies

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