Day Trading Strategies: The Best, Worst, Easiest & Most Popular

day trading strategy on a chart

Day trading allows for a wide variety of different trading strategies, many of which are completely different, but can still bring good results. In this article, we will cover the best, easiest and most popular day trading strategies that use technical analysis only so you can review them and decide which type of strategy you think would fit in to your day trading style and risk tolerance the best. 

The Best Day Trading Strategies

With an insane amount of time spent reading the charts and analyzing market conditions, these strategies have emerged as some of my favorite ways to day trade. These strategies are to be used for scalping so that we can get in and out of the markets quickly and take advantage of multiple small range, but highly probable trades every day. Don’t get greedy and look for big moves, small profits over and over again add up to large amounts over time and once you get your strategy down, it is one of the safest possible ways to build an account.

Liquidity Grabs

Liquidity grabs are excellent scalp trade opportunities because the market makers are moving their order blocks out of the way to allow price to reach just beyond a recent pivot point where they know retail traders stop losses will be placed. They also know that breakout traders will be trying to get in to the market because price has now gone beyond the recent pivot point and those traders will be looking for continuation.

This sets up a prime situation for market makers to sell in to the retail traders and wipe out our positions which then makes retail traders get mad and not re-enter the market or they have to then chase price if they want to get back in. This fuels the reversal move and provides for nice, quick profits for the market makers.

They do this all day long, across every market, so keep an eye out for these setups and look for liquidity grabs that go just past a recent high/low but not past the major high/low pivot points. The reversal will happen in the same direction as the trend, but will take out short term pivots and leave the long term pivots alone. Examples are shown in the image below.

Daily High & Low Bounce

The previous daily high & low are excellent levels to watch when trading. Similar to the liquidity grab strategy mentioned above, you can look for reversals at these levels because market makers like to push price just beyond these levels so they can use your stop losses as liquidity for their massive orders. You will often see price push just past the previous days high or low and then reverse due to this and they provide excellent scalp trade setups. 

What you want to look for is price to extend to the previous days high or low and then watch and determine if price is getting supportive above/below that level. If price stays supportive above the previous daily high then you can look for continuation to the upside. But if price does not get supportive there, then you can expect a reversal. The same goes for the previous daily low; if it holds below the previous low then expect continuation, but if it can’t hold that level, look for the reversal. 

This same strategy can also be used with the previous weekly high and low ad well so keep an eye on those levels, or just use our Supply and Demand indicator if you want those levels to be plotted automatically for you any time you open a chart.

Trend Scalping

You may have heard somewhere that the trend is your friend right 😉 Well, it definitely is your friend and you can use it to your advantage. You need to wait for the market to break out of it previous daily or weekly range and show continuation and then look for higher highs & higher lows if trending up or look for lower highs & lower lows if trending down. 

When the market is moving up you will notice that the lows the market makes are going to be higher each time. These are your short term higher lows and those will hold until the trend changes. There will also be medium term higher lows and long term higher lows that you need to pay attention to. 

The short term trend can be traded by buying the dips when price retraces to a level that is very close to, but still above the most recent short term pivot point. Ride that up for a quick scalp and then wait for the same scenario to happen again; rinse and repeat.

You will get caught in some trend reversals though sometimes, so make sure to pay attention to the mid term and long term pivot points as well because sometimes the market is just looking for more liquidity before it continues, so it may wipe out all of the short term higher lows, but respect the mid term higher low which is still bullish.

The same goes for long term higher lows. Keep an eye on all of these and wait for good entry points before taking your trade. This will help you nail your entries and allow you to keep a tight stop loss because you got in near the same area as the market makers and a move against that position is likely a sign that the market is actually reversing instead of continuing the trend.

The Worst Day Trading Strategies

With over a decade of experience in day trading, I can confidently say that these strategies listed below are HIGHLY likely to blow your account. I have done it all and these two burned me the most, so please pay attention and don’t make the same mistakes that I did. Your account will thank you.

Buying The Dip(Without Multiple Confluences)

If you are a long term investor, buying the dip is an excellent strategy. But if you are day trading, buying the dip without multiple confluences telling you that price is very likely to reverse at that levels, then you are just gambling and will likely take large losses because the market is rebalancing to a price that is fair. The market can make very large drops in small periods of time, so blindly buying the dip when using margin or options or futures contracts is extremely dangerous and will probably make you blow your account. Stick to some of the strategies mentioned above and make sure you have multiple reasons to take a trade.

Breakout Trading(Without Waiting For Support To Form)

Market makers know that there are a lot of retail traders looking to buy breakouts whether it is to the upside or downside. The market makers move their orders out of the way so that retail traders push price just past a previous high/low and then they come in strong and buy/sell into all of the breakout traders orders. This happens all day every day across all markets and is likely the reason you keep taking losses when trying to breakout trade. Only take breakout trades once the market has retested the breakout level and has shown support at that level before taking a continuation trade. 

The Easiest Day Trading Strategy

If you are a beginner at day trading and are looking for the simplest way to get started with trading, this style will help you get started in the right direction without much complication. This trading style is also limited to only a few trades per day, which will keep you from overtrading which can be detrimental to your portfolio(especially once you get a little confidence).

Gap Fills

If you are trading stocks, forex or futures, you will notice a lot of days that there will be a gap up or gap down when the market opens compared to the price that the market closed on the previous day. Pay attention to this gap as that gap means that there are lots of traders trying to get out at breakeven in that gap or looking to enter on the gap fill because it is a very popular and effective entry strategy. If a gap to the downside happens, you can look to trade upwards until the gap is partially or fully filled, but this is slightly risky.

I prefer to wait until the gap is filled and then look for a reversal back to the downside since we already gapped down and many traders will fuel that move back down as they get out at breakeven. If the market gaps up, you can trade the move back to fill the gap, but again that is more risky than waiting for the gap to fill and then trading the bounce back up.

The Most Popular Day Trading Strategies

There are an unlimited number of different day trading strategies out there to choose from, but the following strategies are what I have seen used the most. 

Overbought & Oversold

Many traders use oscillators to determine if a market is overbought or oversold and ready to reverse. This is most commonly done using these oscillators: Relative Strength Index(RSI), Momentum(MOM), Stochastic RSI, Moving Average Convergence Divergence(MACD) and Money Flow Index(MFI). Traders using the overbought and oversold strategies will look for their oscillator to be at the bottom to buy and look to sell at the top of the oscillator range. 

Support And Resistance

Trading bounces at support and resistance levels is an excellent way of finding good entries. I strongly recommend no matter what strategy you use, support and resistance levels should be included in your chart setup, because ignoring these levels can end up costing you. The more prominent the support and resistance level is, the more likely it is that price will bounce at those levels which will help increase your win rate. You can also pair this strategy with overbought or oversold conditions as mentioned above for extra confluence.

Trend Trading

Trend trading is an extremely popular strategy and should not be ignored because you should always be trading in the same direction of the trend to ensure you are giving yourself the best chance at a successful trade. You can use day trading indicators like moving averages and pivot points to help you identify pullbacks in the trend and scalp continuation moves all day every day. Try not to get too greedy though and take profits early so you don’t let your winners turn in to losers because trend strength will vary.

Breakout & Retest

Buying the breakout of a daily or weekly high/low and then waiting for price to retest that level before entering is a very popular trading style and for good reason. As long as you are waiting for confirmation of support after the breakout, this day trading strategy can be very useful. The hardest part about this strategy is knowing if support is actually being formed or not and being impatient and trying to get the best entry can come back to haunt you if it turns out to be a false breakout. 

Tips For Improving Your Strategy

No matter what day trading strategy you are using, you always need to make sure you are back testing your strategy on all kinds of markets, using various timeframes, different trading indicators and other markers to determine how well the markets actually stick to your parameters. Analyze the charts over large sets of data and see how well your strategy works. When you find something that also helps improve the accuracy of your strategy, make sure to write it down and start to compile a list of things that work better than one strategy by itself.

Adding confluence by using support and resistance levels in combination with a breakout and then retest that shows support is a perfect example of how you can increase your win probability by just simply combining two different styles and only trading when both conditions have been met. Just be careful no to add too many parameters to your strategy or you may give yourself analysis paralysis.

Make Sure You Have The Best Trading Conditions

One of the most important pieces to any strategy is making sure you are trading in optimal conditions. If there is low volume or the market is moving sideways, you will either want to stay out of the markets until some volatility comes back or you will need to adjust your strategy to work with small scalps that can be profitable in the current trading environment. I recommend waiting until the volatility shows up though, because those trading conditions make it much easier to catch those decent sized moves in a short period of time which is always favorable. 

As a trader, you will get much better when you learn to start reading the charts and seeing the patterns emerge in real time. It takes a lot of seat time to get a good understanding of how things work when day trading and expecting to figure it out right away or even over a few months is not realistic, otherwise everyone would be rich from day trading. Adaptation is how you thrive in any environment, so make sure you learn to adapt your strategy to the current trading conditions, otherwise you are going to watch a lot of winning trades turn into losing trades and nobody likes that.

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