Finding the right day trading strategy is about matching up the trader’s personality and strengths with the techniques used in the field. Doing so can help increase a trader’s success rate.

Day trading is the practice of buying and selling financial instruments, such as securities, within the same trading day. Traders who practice day trading are called active traders or day traders. This field used to reserve for financial firms, fund mangers, investment firms, and banks. With the advent of electronic and online day trading, however, it has become accessible to almost anybody interested in the practice.

Day Trading Strategies

There are several day trading techniques and strategies available to traders in order to help them generate a profit, but the basic strategies are as follows:

Contrarian Investing, News Playing, Rebate Trading, Trend Following

Contrarian investing is a strategy which is based on the belief that financial securities which have been rising steadily will at a later stage begin to fall. The opposite view applies to securities which have been steadily falling.

News playing, as the name suggests, is the technique of buying and selling securities based on news released by the company.

Rebate Trading is a trading strategy that uses ECN rebates as its primary source of income. This strategy usually involves purchasing low priced securities in large volumes.

Scalping on the other hand involves establishing and liquidating financial securities in a very short space of time. In fact, it is not uncommon for traders who follow this route to purchase and sell securities within minutes, or even seconds.

Trend following is basically the exact opposite of contrarian investing, in that traders who use this strategy will usually assume that rising securities will continue to rise, while falling securities will continue to fall.

Other well known day trading strategies include the likes of ‘short sells’ and ‘range-trading’.

Finding the Right Strategy

Interestingly enough, statistics seem to suggest that approximately 80% of traders end up losing their available capital even before they’ve managed to learn about the various strategies. This is exactly why it’s so important to begin slowly, and to only take small risks in the beginning. Likewise, it’s of paramount importance to find the ideal strategy so that a profit can be made. Below are a few tips regarding how one should go about finding the right trading strategy.

Match the right strategy with the right trader – It is important to match the trader’s personality, strengths, comfort level, and investing freedom with the right strategy. Those who are less inclined to take risks may benefit from scalping, news playing and rebate trading. Risk takers on the other hand may have no problem using trend following and contrarian investing.

Start Small and Try Things Out – Starting with small investments is a good way for a new day trader to learn the pros and cons of a specific strategy. It is also a low risk of figuring out how the business works.

Day traders can of course also benefit financially from using multiple strategies at the same time. For example, you could consider investing the majority of your capital using one of the low risk strategies, while at the same time investing some capital using one of the high yielding strategies.

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