Day trading is a tricky business. Essentially, you are trying to predict minor future price movements based on technical analysis tools, chart patterns, economic data, and your intuition. And while you are trying to achieve this goal, you are spending time in front of the screen for hours, risking your money and, most importantly, your ego.
But many people tell stories that they found the secret to becoming successful traders. Well, that’s very likely. After all, trading is a zero-sum game where one loses a trade, and the other wins the trade. If you find a strategy that works for you and you stick to it, you can become a consistently profitable trader.
So, with that in mind, here are some intraday trading tips and tricks you can use to predict intraday price movements and combine them into your trading strategy.
Below, we’ll take a look at three free intraday trading tips for all levels of traders. Preferably, you need to test these free trading tips on a demo trading account before you use them in the live intraday market. Further, regardless of the method and strategy you use when trading financial markets, always make sure you use risk management tools to increase the chances of successful intraday trading.
Work with Level 2 Quotes
Many successful day traders will tell you to use level 2 market data for day trading. But, what is level 2 quotes, right? And why do you need to use it? Simply put, level 2 is an electronic order book for listed stocks, commodities, or any asset traded on an exchange. Traders and investors who get access to level 2 order boxes in the stock market, for example, can see the real-time orders that are live in the market, including the quantities and market makers.
So what’s the big deal here? What’s the tip? Many intraday traders use level 2 order books to place orders on the buy and the sell sides. Or, you buy and then immediately switch sides. Certainly, you’ll lose some trades using this method, but you’ll definitely make some profits if you find an asset with low liquidity where you can take advantage of this trading strategy.
Moreover, unlike level 1 quotes – when a trader uses a level 2 order book, it’s much easier to get the market sentiment and identify scenarios when big players enter the market. For instance, with a level 2 order book, you can often see when a large financial institution or even governments are placing orders to buy or sell considerable amounts of the chosen asset. When this happens, you get a better visualization and see how the asset or stock price is affected by the involvement of these market players. Once you learn how to identify them, you can understand the battle in the market and take direction. Eventually, this feature will help you find many trading opportunities and become a better trader.
Learn How to Use Chart Patterns
Technical analysis chart patterns are a vital part of intraday trading. Some of these intraday candlestick patterns can produce fairly reliable signals to enter and exit positions, primarily when many day traders commonly use these patterns. For example, the Abandoned Baby candlestick pattern is a reliable indicator of getting into a trade. It forms a gap inside the trading chart, which usually tends to be filled. Consequently, traders immediately exploit this opportunity to enter a position.
Apart from the Abandoned Baby chart pattern, you can find many other chart patterns that are extremely valuable for day traders. All you need to do is learn how to read and interpret these chart patterns.
Trade Synthetic Instruments
Another technique to ‘hack’ the markets is to create customized spreads. What does it mean? For example, instead of trading gold, you are trading the spread between gold and silver or gold and platinum. This technique is handy for day traders as they find many opportunities during the day when one asset moves before the other.
Furthermore, traders usually find this strategy especially effective when focusing on seasonal commodities like oil, wheat, corn, soybean, and many more. They create a spread between two future contracts with different expiry dates. For example, a trader can focus on corn future contracts and trade the Corn July-Dec spread. In this case, due to seasonality and other predictable factors, it is possible to get many indications to enter positions.
To sum up, there are some unique strategies and techniques that you can use to get the most out of your trading experience. Of course, it’s all up to you to find the one trading strategy that works for you and generates profits. However, sometimes it could be helpful to follow someone else’s path and combine other strategies with the one system that you have developed for yourself.
The intraday trading strategies above have been proven to work for other traders, so keep that in mind, and maybe at some point, you’ll be able to take advantage of one or more of these strategies and hopefully become a better intraday trader.