Note From Kalen: I always include all kinds of options when it comes to investing and trading. Always do your own research before making an investment decision.
It’s easy to get caught up in the profit potential of intraday trading. Too many people think there is minimal risk in day trading. But the truth is, there’s enormous risk in this kind of trading; that’s half the fun!
Risk management is a huge part of trading. Only strategies that take risk into account work. And if you don’t manage your risk, you’ll lose everything and be completely out of the game.
Below you’ll learn about the strategies successful intraday traders use to make their millions. Let’s learn how to make money while minimizing risk.
A Quick Overview of Intraday Trading
Intraday trading is not the same as investing. When investing, you buy securities and hold onto them for a long time hoping they’ll gain interests and collect dividends.
Intraday trading works on a shorter timeline, around five to fourteen days. Instead of playing the long game, intraday traders take advantage of the quicker market fluctuations, buying and selling at optimal points.
This kind of trading is a part-way point between day trading and investing. Day trading takes advantage of extremely short-term price movements and use high amounts of leverage.
Now that you have a definition, let’s dig into the strategies.
1. Support and Resistance Role Reversal
Support and resistance is a basic concept in Forex trading. If you don’t know what it is, here’s a quick explanation:
In market psychology, supply and demand are a huge factor. Those two things have their limits and support and resistance are those limits. Support is the level at which the price rarely falls below. Resistance is the level at which the price rarely rises above.
These limits are not hard limits. There is no trading policeman there handing out tickets for going over the limit.
When the prices breach their limits, the roles reverse. If the price rises above the support limit, then the support limit becomes the resistance limit. The opposite happens with the resistance limit.
These indicators tell you when a trend might be reversing. For example, if the price rises into the resistance zone and keeps climbing, this means we’re in an uptrend. But if the opposite happens, we’re in a downtrend.
2. Swing Forex
If you use this strategy, you must be vigilant. These kinds of strategies are crossovers between intraday and day trading.
You must be ready to catch the correction once the market swings. This creates overlapping bars or candles on price graphs. This means lots of overlap.
This is different than a trending price. It doesn’t make progress quickly.
You would trade when the first “candle” moves below the contracting range of the previous ones. You’ll look at last week’s trend and see that it’s continuing to move upward. But be sure to put a stop at the most recent minor swing high. Next, we’ll talk about the candlestick patterns strategies.
3. Bullish Engulfing
These patterns happen when the price candle engulfs the real body of one or more of the other earlier candles. The more candles engulfing candle covers, the more powerful the following ones will be. When you see the engulfing candle, wait. The following candle will signal your open position.
4. Bearish Engulfing
These signal an upcoming bearish price decline. Often these lead to price declines immediately after. So, again, when you see the engulfing, wait. The following candle will be your signal.
5. Long Shadow Pattern
The shadow is the length of the line from a closing price on a candle. It runs from the high or low price on that candle.
Wait for the long shadow candle to close and make your trade.
6. Hammer Pattern
When the real body of the candle sits at one end of the next candle, you have a hammer pattern. These candles form when there is a price reversal. This is a strong signal.
Like the long shadow pattern, you wait for the hammer to close and place you trade on the next candle. Place a stop at the extreme high end or extreme low end of the hammer.
7. Bollinger Band Squeeze
These bands measure the volatility of the price above or below the simple moving average. Mr. Bollinger is the one who discovered that periods of high volatility follow periods of low volatility. When these bands “squeeze” you can suppose a significant price movement is coming soon.
You can know to either buy or sell with this method. Buy when the full candle completes above the line. Sell when the candle completes below the line.
This looks similar to the candlesticks, but the Heikin-Ashi candles use the previous candle close and open price. Not only that, but they use the effects of the high and low price on the previous candles.
Sounds complicated. But it’s not.
It’s best for back-testing and live trading. But to trade, you would enter a long trade after two consecutive red candles and when the Stochastic goes above 70. You would enter a short trade after two consecutive green candles and when the Stochastic goes below 30.
9. Moving Average Crossover
This is standard in all trading platforms. You can set the indicators to the criteria you like.
You need three different moving average lines for this type of indicator. A 20 periods average, a 60 periods average, and a 100 periods average.
20 periods is fast moving, 60 periods is slow, and the 100 is the trend. When the fast moving average crosses above the slow average, you buy. When the fast moving average dips below the slow line, you sell.
10. Narrow Range
This is another extremely short term strategy. It’s similar to the Bollinger band strategy. Narrow range profits from a quick change in volatility from high to low. You’ll want to identify the candle with the lowest range for the past 4-7 days.
Once you identify your narrow range candle, you’ll be pretty sure a volatility spike is coming. Buy when the price rises above the highest point of the narrow candle. Sell when the price dips below the lowest point of the candle range.
Practice Makes Perfect
If you haven’t practiced your analysis techniques, you could lose everything. Study your intraday trading strategies and be ready to take some risks. Always insert a stop so you don’t make a bet you can’t come back from.
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