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Day Trading Strategies That Work

Day Trading Strategies That Work
June 06
23:14 2011

Day trading strategies

The phrase “day trading” implies a strategy that involves making transactions during the trading day for a particular security, currency pair or commodity future. Furthermore, day trading strategies generally require that all trading positions must be liquidated before the close of the relevant market on the day they were opened.

While stock and futures markets tend to have a well defined trading day determined by their respective open market hours, the forex market is open for trading around the clock from Sunday evening to Friday afternoon New York time. As a result, a currency trader pursuing a day trading strategy probably means that they trade just during their local market’s usual business hours.

As a strategic principle incorporated into a trade plan that also includes sound money management principles, day trading has several beneficial aspects that can enhance a trader’s profitability. Two of the primary benefits of day trading are covered in the sections below.

Day Trading Occurs When the Trader is Most Alert

Perhaps the main benefit of day trading as a strategy for speculating on movements in the stock, currency and commodity futures markets is that trading positions are usually only open when the trader is fully awake and alert.

This means the day trader typically has a better chance of making quick and intelligent decisions that should help put them ahead of the game. Being alert should also help sharpen their trading reflexes and make them ready and able to act quickly to take advantage of new opportunities or to avoid looming potential losses.

Day Traders Avoid Overnight Exposure Risk

Overnight exposure risk is the risk of sharp movements occurring in the underlying market occurring during evening or early morning hours when the trader is usually not awake and actively observing their positions.

This form of trading risk can be especially troublesome for traders operating in the currency markets that trade throughout each business day. Nevertheless, stock and futures markets often gap up or down at the market opening and this also reflects the overnight exposure risk that traders holding open positions overnight must face.


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Not only can significant price or exchange rate movements occur in any time zone as news and economic data is released, but overnight markets often trade on wider price spreads. Also, trading during less liquid time frames can result in substantial order slippage and stop losses that are filled just before the market reverses in a trader’s favor.

The day trader is especially fortunate to be able to completely avoid overnight exposure risk — as well as the added stress that such risk involves — since they traditionally close out all of their open trades before the trading day ends.

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Today’s Day Trader Strategy

One of the most common and destructive mistakes a day trader makes is to simply not follow their plans. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.

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