In This Article, We will introduce some of the Intraday Trading Strategies based on three elements.
- Price Action
- Technical Indicators
- Candlestick Pattern & Chart Patterns
This is very important to learn and practice all three elements at the same time because some intraday trading strategies require only technical indicators and some intraday trading strategies only require price action.
So, He is very helpful in understanding price action and chart patterns in order to become a profitable day trader.
Intraday Trading Strategies
As an Intraday Trader, You shouldn’t care about the company’s fundamentals. You have to focus only on price action and candlestick patterns.
Let’s understand intraday trading strategies one by one….
Strategy 1: ABCD Pattern Strategy
The ABCD Pattern is one of the easiest patterns to trade in the stock market. It is an excellent & amazing choice for beginner traders.
The ABCD Pattern is a very rarely seen pattern, but still, so many traders are still trading it.
You all know, that Trend is your friend in the market. A Trend may very well be your only friend. Let’s take a look at the pattern in this picture.
The ABCD Pattern always starts with (A) a Strong upward move. At this point, buyers are aggressively buying from point A and making higher and higher prices of the day(Point B).
At this point, you want to enter this trade, but you should not fight the market because at point B. It’s already at a high price.
If you plan your trade on a higher point. So where will be your stop loss? You should never enter any trade without knowing where your stop loss is.
At point B, Traders who bought the stock at point A, start slowly selling it for profit and the price comes down.
You should still not enter the trade because we do not know where the bottom of this pullback will be.
Must Read: What is Day Trading and How Day Trading Works?
Strategy 2: Bull Flag Strategy
In Day Trading, a Bull Flag Pattern usually forms on low float stocks. It’s very difficult to manage the risk and requires a fast execution of the bull flag strategy.
The Bull Flag resembles a flag on a pole. In Bull Flag, You have multiple large candles going up(like a pole) and you have multiple small candles moving sideways(like a flag).
As an Intraday Trader, we can say that consolidation phase. Consolidation means that the trades who bought shares at a lower price are now selling and taking their profits.
In this scenario, the Price does not decrease sharply because the buyers are still buying the stocks and sellers are not yet in control of the price.
Many Traders who missed buying the stock at the lower level of the bull flag, will now be taking the trade at this level.
As a Trader, you should wait until the price breakout in the consolidation phase of the bull flag pattern. As soon as the price starts breaking up in the consolidation area, now you can start trading on this stock.
Must Read: How to make money from the Stock Market
Strategy 3: Vwap Strategy
Volume weighted Average(VWAP), is the most used technical indicator for day traders. A swap is a moving average that takes the volumes of the shares being traded at any price.
Other Moving Averages are calculated based only on the price, but Vwap also calculated the number of shares traded at any price point.
Every Trading Platform has Vwap built into it and you can use it without changing any of its default settings.
When the Stock price is traded above the volume line, it means the buyers are in control of the price. So you should only think about a long position.
When the stock price is traded below the swap line, It means that the sellers are in control of the price. So you should only think about a short position.
Must Read: What is Online Trading and How does it work?
Strategy 4: Support or Resistance Strategy
The Market always remembers price levels, which is why horizontal support or resistance lines on previous price levels make sense.
Support or Resistance Trading is my favorite style of trading.
Support is a price level where buyers are strong to reverse a downtrend. When a downtrend hits a support level, prices bounce back because most of the buyers are waiting for the price at the level.
Resistance is a price level where sellers are strong to reverse an uptrend. When an uptrend hits a resistance level, prices bounce back because most of the sellers are waiting to sell their position.
Must Read: 11 Types of Trading Styles : Choose right Style for you
Strategy 5: Opening Range Breakout
Another very popular Intraday Trading Strategy is the so-called opening range breakout. This Strategy tells you only entry signals, you can not determine the profit target from this strategy.
You should define the perfect target based on the other price action & technical levels. In an opening range breakout strategy, you must define the proper entry, exit, and stop loss.
Right at the open(at 9:15 AM), you want to give the opening range at least five minutes. This is called the 5 – minute range breakout strategy.
Some Traders will wait even longer such as 15 min or 30 min.
The upper and lower boundaries of the range can be identified by the high and low of the 5 min, 15 min, or 30 min.
If the Price breaks the upper boundary, You should consider a buy position. If the Price breaks the lower boundary, You should consider a sell position.
Intraday Trading is risky, so before jumping into any intraday trading strategies make sure to have proper knowledge of intraday trading and the stock market. You can choose any strategy to trade, but first, backtest the strategy by yourself and identify which strategy is right for you.