What is the best day trading strategy for beginners?
A day trading strategy that beginners can easily use to make money.
A day trading strategy that beginners can use as a starting point to learn and improve, while minimizing losses.
Novice traders should not be driven by profits. Instead, their day trading strategy should focus oncontrolling risk and developing the trader.
Day traders who are just starting out should not be led into the glamour of raking profits day after day without first understanding the risks of day trading.
To ensure their longevity in the market, day traders must be able to learn from their trades and develop the right trading attitude.
Look out for day trading strategies with the following characteristics to start your day trading journey right.
1. INFREQUENT DAY TRADES FOR BEGINNERS
Beginners should trade infrequently. For traders who are still grappling with their trading edge, trading less is definitely better than trading more. It is a form of risk control.
Trading infrequently also gives you time to learn from your trades. You will also be able todevelop a greater awareness of your emotions and keep them in check. Taking dozens of trades in a flurry will only cloud your analysis and fuel your feelings of fear and greed. Follow these tips to to trade with a lower frequency.
- Avoid scalping strategies.
- Trade higher time frames. (Use 5 minute charts instead of 5 seconds charts)
- Be very selective and take only the best trades.
2. DAY TRADE WITH THE TREND
Day traders love to boast about picking the top of the day or low of the day. When you do catch the top or bottom of the trend, you feel like a hero. When you do not, you feel like a loser trying to fight the trend that seems to go on forever.
Trading is not about heroes and losers. It is about patience and persistence.
A trend trader must be patient and wait for a trend to develop. A trend trader must also be persistent in taking trades with the trend and not be tempted to pick the top or bottom. Trading with the trend helps a beginner focus on the right state of mind necessary for consistent profitability.
3. PASSIVE POSITION MANAGEMENT FOR DAY TRADING
A novice day trader should set the stop and target for each trade, and leave them alone. Do not adjust your stops and targets.
This is because a beginner is prone to adjusting their stops and targets emotionally. They make adjustments because they are affected by the blinking profit and loss figure on the screen. Only confident and experienced traders who can manage their trades based on objective analysis should do so.
Rather than meddling with the position when you have neither confidence in your skill nor control of your emotions, leave your stop and target alone. Take out a piece of paper and write down what you would have done if you were managing your position actively. This is a learning process.
Once you have a sizeable sample (>30 trades), compare the the results of passive management versus if you had managed it actively. You can then evaluate if you should be actively managing your trades.
This rule of passive management will also deter a beginner from cancelling the stop loss order, our ultimate risk control tool.
EXAMPLE: ADAPTING THE 9/30 DAY TRADING STRATEGY FOR BEGINNERS
Most day trading strategies can be adapted for beginners. Let’s take a look at how we can adapt the 9/30 trading setup for beginners according to the characteristics discussed above.
- The best trades of 9/30 trade setup are the first pullbacks after a new crossover. We will restrict our day trading strategy to taking only these infrequent best trades.
- 9/30 trading strategy capitalizes on retracements. Following its rules will naturally keep you with the trend.
- Place your target at the previous trend high/low and place stop a tick below/above the signal bar. Do not adjust.
There you go, a sound day trading strategy for a beginner. Remember that the best day trading strategy for beginners is not the perfect trading setup, it is the best starting point towards success.
Take a look at our Day Trading Strategies collection for many other day trading strategies that can be adapted for beginners.
By Galen Woods