6 Day Trading Strategies, And How To Use Them

I’ve found success as a day trader thanks to one underlying principle: repetition. I’m disciplined enough to stay within myself and not force trades that I “could” make. Part of that has to do with the six strategies I’ve relied upon at one point or another in my trading.

In no particular order, here are those strategies and how I’ve used them.

Gap and Go!

I use the Gap and Go! strategy exclusively for the first half hour of trading every day, meaning I’m doing most of the work before the market opens. The goal here is to get myself a handful of quick, easy trades that I can use to build my confidence and get the day off to a good start.

I start by scanning for stocks that are gapping up or down by at least 4 percent in premarket trading, and look for potential catalysts for those moves. Of those stocks, I look for the ones with charts that have a flag pattern. For these stocks I prepare a buy order so that I can buy the high of the first 1 minute candle. I place a stop at the low of that candle to limit my downside.

I’m also watching each stock’s float so I can get a feel of trader interest. Stocks with low floats have bigger potential to run during the day.

Momentum Trading

This is one of the first strategies I learned as a trader. At its surface, it’s a very basic strategy: profit off stocks that are moving.

I do that by following a process similar to the Gap and Go! Strategy. I scan for stocks that are moving up or down on volume, and that have a low float (preferably under 100 million shares). Then I check the charts, looking for stocks that aren’t near resistance and have strong moving averages.

From there I look at volume. Is the stock trading at a high volume relative to its average? If it is, that signals to me that this is a trade I’ll want to get into. If it isn’t, that tells me this may not be a trend so much as an odd-lot.

Bull Flags

This is a technical pattern I’ve come to rely on in my trading, particularly at the beginning of the trading day. In a bull flag or pennant pattern, a stock will spike up on volume and then slowly drift down on lighter volume. That drift down usually precedes a second rally.

In the example below, the SPY pushed about $0.30-0.40 on the initial move up, so that is how much you would ideally like to see on the second break out.

Breakout Trading

I like breakout trading because it requires being fast on both on the entry and exit, and because I know almost instantly if I was right or wrong.

Unlike momentum trading, where the goal is to buy a stock before it breaks out, with a breakout trade I want to actually get in at the apex of the breakout. To do this I use a handful of technical patterns: bull flags, bear flags, flat tops, flat bottoms, ascending wedges and descending wedges.

Pull Backs

This is one of my preferred ways of trading downside. In this strategy I look for a stock that’s trading up significantly (I’m looking for five or more green candles in a row) on extremely high volume, and then pulls back to the 9-day exponential moving average. The goal is to grab the stock on the first or second pull back.

I find these stocks by monitoring the volume leaders and gainers for the day, and then simply wait for them to pull back. If they do, I buy it once I see a 5-minute candle make a new high (I find looking at 1-minute candles are too choppy).

Reversal Trading

This strategy produces the highest profit/loss ratio trades out of all my strategies. I typically make between $0.50-1.00 per share on these trades, and set stops at $0.20 to limit my downside.

For this strategy to work, I look for stocks that are hitting new highs or new lows. Think of these stocks like a rubber band: the further stretched out they get, the better the potential for a snap back to reality. If a stock hitting new highs or lows also has an RSI below 10 or above 90, I’m buying the first candle to begin the reversal.

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