What is the Most Profitable Type of Trading?

While anybody can start forex trading, becoming a successful trader demands more than just hefty investment capital. Remember, plenty of individual traders want to join the ranks of successful traders and generate huge profits per trade. A few equal or even come close to being professional traders. Making profits continually in the financial markets is as rare as winning multi-million jackpots in lottery games. One of the best ways to be successful in the forex market is to incorporate effective trading strategies. The main difference between losing traders and winning traders heavily relies on fundamental analysis and technical analysis. Today’s post reviews the most profitable type of trading. So, read on.

Why Day Trading Stocks Can Be A Profitable Type of Trading

When it comes to stocks, traders need volatility, trading volume, and trend trades. Although it’s hard to claim that one type of trading is more fruitful than another, most active traders prefer day trading stocks due to their high profitability. Why is it hard to figure out the most profitable trading type? Well, it’s because determining profitability comes down to what type a trader is and the included active trading strategies. Besides, traders are active in different market conditions and different asset classes. Individual day traders can only place a couple of trades daily due to difficulties involved in entering and exiting many trades per day. Indeed, big traders prefer long-term trading opportunities. However, trading stocks during the day is a move traders need to evaluate carefully before entering into any trades. As a trader, it would be wise to evaluate all the difficulties, market volatility, and trading styles as this type of trading demands careful planning. Careful evaluation and risk management can bring benefits from day trading stocks.

“Sufficient knowledge makes it possible to place successful trades and earn daily returns. This holds true even when the trader has no disposable income to invest.” Says Tixee

Overview of Trading Stocks During the Day

Trading stocks during the day means that a trader enters and exits trading in a single trading day. For instance, trading day stocks can entail entering a trade at 10 PM and exiting it before 2 PM. While some position traders only trade during the day, most trades are based on minor price fluctuations, day trading opportunities, and market situations. In general, only a few traders day trade stocks and other financial instruments. It is, however, worth noting that some institutions engage in prop trading.

How Day Traders  make their Stock Picks

Day traders adhere to some trading rules that are always cautious and avoid trading on the stock they find, regardless of the prevailing stock prices. At all times, these traders assess the main reasons for investing in a given stock. The fact that these reasons are different means traders have different types of trading strategies and criteria. Remember that countless types of stocks that traders can trade on exist, making it hard to discover the best stock. Some traders easily find new stocks daily because they search for stocks with a breakout trading trend. Also, some traders are searching for stocks with high volatility or those that breakout of support or resistance levels. What’s more, others have preferred stocks that they trade daily for months or even years. Mostly, they do this due to the stock’s benefits. A trader that recognises a stock superbly requires little to no research on it. Thus, there is no need to do comprehensive research for new stocks and volatility or breakouts for traders who have already picked one.

How to Discover the Right Stock for Day Trades

For those that want to become day traders, it’s essential to consider the following things:

●      Volume Stock volume is vital for day traders as it determines when to enter and exit trades. Entering and exiting trades during the day is much easier if the stock volume is high. “It is important to reduce and avoid slippage when volatility is high”, says the Balance. Slippage usually happens when traders get prices that differ from the projected one, regardless of whether the traders are on trade’s entry or exit levels. A slippage happens if the stop-loss point or market order fluctuates somewhere between a trade’s entry time or execution time. In most cases, this occurs during high volatility periods when orders are larger than the typical stock amounts on the bid or offer.

●      Trend and Range These two aspects are vital when it comes to stock day trades. Traders differ by what they trade. So, there is a range trader, a trend trader, or a combination of the two. Simply put, a range is a difference between a stock’s high and low price over a specific trading period, while a trend is similar to position trading, that is, the movement of a stock’s price.

●      Volatility Volatility is vital when trading stocks during the day as they need a significant change all day long. Stocks comprise different volatility, which can range between 0.5% and 5% daily or even more. Trading on a given stock relies on several aspects, such as trading technique and trader’s temperament and reflexes. Most traders prefer stocks that fluctuate between 0.5% and 2% per day because they handle volatility easily. Managing volatility of more than 5% per day is challenging, and only the best and most skilled traders can trade on these stocks.

How to Profit from Stock Day Trades

Several strategies and ideas exist to assist intra-day trading enthusiasts in maximising their potential profits. All in all, the most important thing is to manage the risks involved. First, it’s advisable only to trade the amount that one can afford to lose. Simply put, traders should assign some specific amount of money for day trading. Besides, avoid taking loans to trade as the market can go either way. What’s more, one should avoid quitting the daily job immediately, thinking that the profits made from stock trading will settle all bills.

Day Strategies for Stocks

●      Scalping Strategy This strategy entails utilising small wins, which accumulate later in the day. A trader sets buy and sell targets and sticks to them throughout the day. This is the best day trading strategy that suits traders who can quickly make decisions, act, and stick to them.

●      Momentum Trading In this strategy, traders take advantage of the stocks whose price is rising. The strategy is popular amongst beginner traders as it focuses on news and identifying strong trends. Traders need to keep an eye on earnings reports and any other major news.

●      Breakout Trading The breakout strategy focuses on when the price clears at a given level on the price chart. One thing to be aware of is the increasing volume. So, one can only initiate long-term trading once the stock breaks above the resistance level. On the other hand, enter into short-term trading should the stock break below the support level.

●      Pullback Trading When using this trading strategy, search for a stock with an already established trend. Afterward, evaluate the trend until the price starts to decline. If the established trend is rising, it means the trader needs to enter the trade and buy. If the trend begins to experience a downward trend after entering, avoid becoming anxious because the previously established trend will continue for a prolonged period.

Swing Trading vs Day Trading

For new traders, day traders and swing traders are entirely two different individuals. A day trader is an individual that enters and exits several trades in a day. A swing trader, on the other hand, is a trader whose trades last days or months. When choosing which type of trader to become, it’s always advisable to consider goals, emotions, time, and various markets.

Stocks vs Forex: Which is the Most Profitable?

Well, there’s no straightforward answer to this question as it comes down to traders’ preferences and trading techniques. For those with shorter-term plans, forex could be the best option because they are liquid markets. On the other hand, stocks suit long-term traders who have the patience and will to perform conclusive market research.