Day Trading Strategies for Beginners

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There are many different day trading strategies that momentum traders use. Techniques include the gap and go, red to green moves, vwap trading, ride the 9, dip buy reversals, Ichimoku, and shorting. These are day trading strategies that work. That doesn’t mean you must be good at each trading style. Each trader has their trading preference. The gap-and-go strategy is probably the most popular day trading strategy. It entails gapping stocks in the premarket where the price rises above the previous close price.

Table of Contents

Best Day Trading Strategies

Gap and go
Red to green moves
VWAP trading
Ichikmoku cloud trading
Dip buying bounces off moving average lines
Shorting reversal patterns
Buying stocks at momentum breakouts
Purely trading price action
Heikin Ashi Trading Strategy
Momentum bull flag strategy

Before we break down day trading strategies that work, it’s important to know the brutal truth about becoming a day trader: It’s HARD! Learning how to trade penny stocks will become one of the hardest undertakings of your life.

The failure rate as a momentum trader is over 90%! That’s right…you’re joining an industry where the odds are stacked against you. You’re about to join a club where you’ll be trading against the best traders in the world. Don’t let that discourage you.

If you want to become successful, one of the most important things to remember is that proper risk management strategies will be the key to your success. Ideally, you want to have at least a 2:1 profit/loss ratio. Never risk more than you can potentially make!

Let’s break down some of the most popular day trading strategies.

1. Gap And Go

How the gap and go strategy works:

Scan for gapping stocks with a minimum of 3% gain pre-market
Watch for breakouts on daily charts (news is one of the best breakout catalysts)
Yearly or all-time highs create huge breakouts
Low floaters create the biggest volatility spikes
Look for high relative volume
Watch for multi-day runners after a daily breakout
Keep an eye on the shorts after 3+ consecutive green days

The gap and go strategy is probably the best intraday trading strategy. The reason why this strategy is so popular is when a stock moves pre-market, there’s a chance that it might run at the open. Hence, the term gap and go. A stock is essentially gaping above the previous day’s close price.

Day traders use momentum scanners to search for gap & go setups during the premarket. They build a watch list of 3-5 stocks and then watch them for potential momentum breakouts at the open. Traders use day trading scanners to search for momentum trades when the market is open.

Day traders are searching for stocks with high volatility, which usually equals high volume. High-volume stocks hit the scanners and capture the most attention. Many of the time, stocks have a lower float, which means they can have a higher gap up and gap down percentages, and this is why it is such a popular day trading strategy.

This is an example of a gap-up on a daily chart. Take note of the move-up in price from $0.36 to $1.27. This extreme move allowed day traders the ability to capitalize on the short-term price movement intraday. These types of momentum trades can happen several times per week when day trading.

2. Red to Green Moves

How the red to green strategy works:

Watch for stocks that go red to green on the day
Indication that the stock may continue bullish
Enter a long position as price goes above previous close line
Place stop loss below previous close line
Use a day trading scanner to search for red to green moves

Red-to-green moves are often great day trading strategies. This strategy is when a stock goes up above the previous day’s close price. Many times, stocks will continue to rise when this happens.

The previous day’s close line is a strong indicator that signals whether a stock may continue bullish or bearish. Traders pay close attention to when a security goes red or green on the day. The day trading scanners also pick up on these moves instantly, which is how day traders trade the momentum. Again, we use Trade Ideas to find these setups.

In the example above, you’ll notice the yellow dotted line. This is the previous day’s close. You’ll see the red highlighted box at the open. The price started to sell off shortly at the open and was consolidated near the previous day’s close. This is when the bulls came in and pushed the price up. Notice the high volume bars at the previous close line. This is a strong indicator that the price will continue to be bullish, which it did.

Note, at the end of the day price had a strong rally, creating a head and shoulders pattern. Once the price failed the neckline area, it fell back down to the previous close line. Again, you’ll see the high-volume bars come in, and the bulls push the price back up right at that important support level.

3. VWAP Trading

How the VWAP trading strategy works:

Add the VWAP indicator to your intraday charts
Choose to add or delete upper and lower bands
Shows the stock’s equilibrium level intraday
Important support and resistance level
Take a long position if the price goes above
Take a short position if the price falls below

VWAP is another important day trading indicator that many traders pay attention to. It’s right up there with ema‘s and sma‘s. It is a popular momentum indicator that shows the stock’s equilibrium levels intraday.

Traders take a long position once the price goes above and a short position once the price falls below the volume-weighted average price. Many traders only use this indicator when day trading. That’s how popular this indicator is when using day trading strategies.

Check this $ROKU VWAP trading setup. There are pretty solid entries and exits if you follow the signals. A trader would have taken a short entry at the top of the first upper band area, which was resistance. They would have covered their short position once the bullish harami formed at the base of the lower bands.

Traders would take another short position as the price failed the upper band area again, which created a double-top pattern. They would cover their short position once the double bottom pattern formed at the base of the lower bands.

4. Ichimoku Trading Strategy

Believe it or not…some traders use the Ichimoku Cloud Trading System for one of their solid day trading strategies. It’s a simple-to-use system with clear entries and exits you can spot. It’s a visual trading system indicator with a strong presence on the chart. It can take some time to learn at first but is highly effective.

Instead of using exponential and simple moving average lines, they use Ichimoku. There are lines built into the system that act like moving average lines. Ichimoku isn’t as popular as moving average lines, but it is still a solid day trading strategy.

This is an example of the Ichimoku Cloud on a daily chart of Apple.

Foundations of Successful Trading

1. Order Entry

Limit orders are much safer to use than market orders when stock trading. They protect your entries and exits, whereas market orders are much riskier because you don’t know what your fill will be. Level 1, Level 2, and time and sales show the breakdown of buyers vs. sellers. They have a symbiotic relationship and work in partnership with each other. Always be aware of how many buyers and sellers potentially want to enter and exit a trade.

Lots of manipulation happens with level 2, so always monitoring time and sales is important. Time and sales are buyers and sellers and where they bought or sold. The Level 2 data is real, but it does not mean many buyers or sellers want to buy or sell. It could be just Algo’s (computers) playing games or traders setting bait.

2. Charting

Learning to draw support and resistance levels on stock charts is critical to your day trading success. Traders are creatures of habit, and finding proper support and resistance levels is essential.

Exponential moving averages and simple moving average lines are important indicators that traders pay particular attention to. They tell an important story on all chart time frames.

One of the best day trading secrets we can give you is watching for the 9/20 ema crossover. If the nine ema points upwards and pushes the price up, you could ride the 9.

Final Thoughts: Day Trading Strategies

Above, we’ve mapped out different strategies you can focus on as day traders. You don’t need to be good at all of them. Pick one and learn it inside and out. Often, new traders try to learn too many strategies at once, and that’s why they aren’t successful.

Please choose your favorite day trading strategy and master it before moving on to the next. Also, pick your favorite pattern to trade. There’s no need to trade a lot of patterns, just a couple of your favorites. Once you become comfortable with trading your favorite setups, then learn others. As always, use risk management when doing day trading strategies.

Frequently Asked Questions

Which Strategy Is Best for Day Trading?

Day trading strategies that work include, but aren’t limited to, the gap and go strategy, red to green move, and moving average cross.

What Is the Simplest Day Trading Strategy?

If you want a simple day trading strategy, trade using support and resistance with candlesticks. This is also known as price action.

Can You Day Trade With 1000 Dollars?

You can day trade with $1,000, but it could be not easy depending on what you’re trading. You’ll need to ensure you’re good at your chosen strategy because it’s easy to blow up your account.

What Is the 11AM Rule in Trading?

If the market hasn’t reversed up or down by 11 am, then the direction for the day is most likely set. However, breaking news and/or FOMC can change that.

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Day Trading Strategies for Beginners