A collection of Forex day trading strategies that you can apply in your day trading to hopefully make some money. But before that, it’s essential to know the basics of day trading first.
I have a post on day trading and a post on the best day trading books so it is wise and highly recommended that you read those articles first before following along with the strategies we will be covering in this article.
Successful Day Trading Video
Below is a video of a successful day trading I’ve done. I trade forex for a living since 2008 and made consistent profits by simply combining these day trading strategies. Watch this video first before you continue reading the rest of the article details below.
Table Of Contents
- The Candlestick Pattern Strategy
- The ABCD Pattern Strategy
- The Reversal Trading Strategy
- Support And Resistance Trading Strategy
Many people hear about this investment opportunity and how much money it can make them, so they jump in and start day trading without doing any research. Not only his is very dangerous if you don’t fully understand how day trading works, but it’s also difficult to make money.
Once you have a solid understanding of how day trading works, we can now proceed to study and look at some of the best day trading strategies that you can use to hopefully make money day trading.
The Candlestick Pattern Strategy
The first strategy that we will take a look at is the candlestick strategy. There are a few options that come with it, and it often depends on which direction you think the market will go. To create a candlestick chart, you need to switch your chart to “Candlestick”. Most trading software these days defaults to candlestick chart already but in case your screen is different, make sure that it is the candlestick chart. In Candlestick trading, you need to remember a few things, and these are:
- The Opening spot price.
- The Highest spot price.
- The Lowest spot price.
- The Closing spot price.
Oftentimes, they are called “OHLC” which is short for Open, High, Low and Close of the candle for the particular timeframe.
There are a few different types of candlesticks that you can work with, and the first option will be the bullish candlesticks. Candles that have larger body towards the top are considered bullish, and they mean that the buyers will be the ones who are in control of the price.
When you see this kind of chart, realize that it is likely that the buyers will keep pushing so that the price goes higher. This kind of candlestick is not only going to tell you the price, but it is also able to tell you that the bulls are winning and that they have the power.
There are also the bearish candles. They will work a bit differently than you will find with the bullish candlesticks and can have you react differently.
When you see a bearish candle, it means that the sellers are the ones in control of the price action that goes on in the market and that buying would probably not be a good idea at this time.
There are also some candlesticks that are known as indecision candlesticks. There are two main types of indecision candlesticks including spinning tops and Dojis.
With these candlesticks, the sellers and the buyers have powers that are pretty close to even. No one is really in control over the price of the stock, but there is still a fight that is going on.
The volume on these will be lower because the traders want to wait and see whether the buyers or the sellers will be the ones that wend. You will notice that a trend in the price is often going to change right away after this kind of indecision candle, once either the sellers or the buyers have won the fight, so it is worth your time to recognize this kind of price action.
You may want to wait a bit before jumping into the market to see which way the market will go. Sometimes it will go well, and the price will go up, but the market could also go the other way, and you could see the price drop.
Day Trading Candlestick Pattern Summary
The candlestick pattern is a great way to predict how the market’s next move.
When the market is going up based on these candlesticks, you will want to buy and then close your position (selling back) before they go down.
And when the market is going down based on these candlesticks, you will want to sell and then close your position (buying back) before they go up.
Take some time to learn how to spot these chart patterns and you will find that they are a fantastic way for you to time the market and make some quick money day trading.
The ABCD Pattern Strategy
The ABCD Pattern is one of the most basic and most natural patterns for day trading. Although it is simple and has been known for a long time, it still works effectively because so many traders are still trading it.
You should do whatever all of the other traders are doing because a trend is your friend. A trend may very well be your only friend in the market.
Example Of Selling ABCD Pattern
Below is the 1-Hour Chart of the EURUSD pair. The pattern starts with a downward move from point A to Point B. Then at point B, the pair rally and finds resistance at point C. After reaching the resistance at point C, the pair then continues its trend and moves further down to point D.
Example Of Buying ABCD Pattern
Below is the 1-Hour Chart of the EURUSD pair. The pattern starts with an uptrend move from point A to Point B. Then at point B, the pair dips and finds support at point C. After reaching the support at point C, the pair then continues its trend and moves further up to point D.
ABCD Day Trading Summary
- Find a currency pair that is highly volatile for the day. (Strong trend)
- Watch the pair during consolidation. (pullback at point C)
- Place a trade within support and resistance. (above/below point C)
- Take profit at point D.
The Reversal Trading Strategy
Reversal strategies have defined exit and entry points and this is the reason why many day traders love to trade this strategy. It gives you some clear guidelines about when you should get into the market and when you should leave the market.
When working with a reversal strategy, you will notice that four essential elements need to be present. These four elements include:
- There needs to be a minimum of five candlesticks present on a five-minute chart. They can be moving downward or upward, but they need to be present.
- The Currency pair will have an extreme five-minute Relative Strength Index indicator. If the RSI is above 70 or below 30, it should catch your interest.
- The pair is being traded near, or at least close, to significant support or resistant level.
- Once you spot a trend that is coming near an end (as can be seen with indecision candles), you could be near a reversal. This is what you should be watching out for, and you need to be ready when it comes!
Support And Resistance Trading Strategy
Support and Resistance trading are prevalent and you will find many day traders love to trade using this strategy.
Support is a price level where buyers usually open up a new BUY position or that sellers closed their opened positions to secure some profits.
Resistance is a price level where sellers typically will enter the market to open a new SELL position and/or those old buyers usually closed their opened positions to secure some profits.
Support and resistance levels are significant reference points because so many traders recognize them and believe in their significance.
It’s herd mentality 101.
If enough traders believe in the importance of a support level, traders will not buy until the price reaches that support level. Besides, short sellers won’t cover until that level.
Similarly, if all traders know there is a resistance level nearby, they will start selling at that level because they are afraid the price might bounce back before they can sell for a profit. Short sellers will also begin to sell at the resistance level in the hope of a price drop.
It is at these levels that the balance of power between the buyers and the sellers will usually shift.