9 Investing Strategies: Day-Trading

Day-Trading is a short-term investment strategy where investors buy and sell cryptocurrencies within the same trading day to capitalize on intraday price movements.
This strategy requires a deep understanding of technical analysis, market indicators, and high levels of discipline. Due to its complexity and high risk, daytrading is not recommended for beginners or most investors.

When it comes to day trading, it’s best to go in with eyes wide open: while the potential for profits might be possible, the risks are real. As you enter the realm of day trading, here are some additional tips to consider:

  • Establish your strategy before you start. Losing money scares people into making bad decisions, and you have to lose money sometimes when you day trade. Having an exit plan for each of your investment holdings is important because it helps you avoid making an emotional decision when you need to make a rational decision.
  • Be patient. Look for trading opportunities that meet your strategic criteria. If the situation doesn’t meet it, don’t trade. You don’t have to trade if nothing looks attractive.
  • Read, read, read. Continually watch what’s happening in the markets. Big news — even unrelated to your investments — could change the whole tenor of the market, moving your positions without any company-specific news.

Day trading risk management

The above ground rules can help you avoid some of the biggest catastrophes in day trading, but it’s important to manage smaller risks, as well. Risk management is all about limiting your potential downside, or the amount of money you could lose on any one trade or position. When considering your risk, think about the following issues:

  • Position sizing. If the trade goes wrong, how much will you lose?
  • Percentage of your portfolio. Closely related to position sizing, how much will your overall portfolio suffer if a position goes bad?
  • Losses. What level of losses are you willing to endure before you sell?
  • Selling. After making a profitable trade, at what point do you sell?

Even with a good strategy and the right securities, trades will not always go your way. It’s important to have a plan for when to close a position, whether it’s purely mechanical — for example, sell after it goes up or down X% — or based on how the stock or market is trading that day.

Proper risk management prevents small losses from turning into large ones and preserves capital for future trades. But that means traders have to be willing to realize a loss, which is hard for many traders to accept, even though it’s essential to long-term survival.

Next: Strategy 4