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Stock Market Day Trading

Stock Market Day Trading Strategies

Today’s article will discuss stock market day trading strategies for day traders. Day trading is the buying and selling of financial instruments, including stocks, within the same trading day. All positions are closed before market close each day and traders are able to work from home. This type of stock trading requires extensive knowledge of the stock market and different day trading strategies.

Scalping is one of the most popular forms of day trading and the goal is to buy (or sell) a number of shares at the bid or ask stock price, and then quickly sell them a few cents higher (or lower) for a profit. Scalping is not limited to only stock however, and can also apply to currencies, forex trading, and futures trading. Traders who utilize this method of trading will typically place between 10 to hundreds of trades in a single day.  A true scalper is sure to exit a position quickly if the market doesn’t go his way. That is why this form of trading is best suited for experienced traders who are able to execute trades quickly without hesitating.

Another stock market day trading strategy is called fading. This from of trading involves the shorting of stocks after rapid moves upwards. Fading requires the trader to have a very high risk tolerance due to its nature for potential significant short-term gains. This strategy is based on the assumption that the stock in question was overbought, early buyers are going to start taking profits, and existing buyers will be afraid and sell. The price target when fading is when buyers begin to step in again. This is an investing strategy that is also best suited for experienced traders who know the ins and outs of the markets.

Momentum investing involves trading on news releases and/or finding strong trending moves supported by high volume. The price target is when volume begins to decrease and bearish candles start appearing. This stock market day trading strategy is one that relies on short-term movements in price rather than fundamental analysis. Momentum traders will look for companies whose stocks have grown in strength over the past 3 months to one year with the intention to buy high and sell even higher. Over time momentum trading has proven itself a profitable strategy as long as you know what you are doing. The stocks that are bought are highly volatile so timing is everything with this investment strategy.

Day trading stocks is a very risky way to make money investing in the stock market, however it can be done. The most important things to remember are to research your strategy of choice, practice your strategy of choice repeatedly, find a stock trading mentor who practices your strategy of choice, and most importantly, only trade with money that you have! Take your time with online paper trading before you begin to invest with real money to ensure that you know what you are doing. Day trading is not a game and you can lose money in a split second. Take the time upfront study your stock market day trading strategy and to ensure your success!

Market Direction:  Please pardon the redundancy of some of the candlestick observations. When market conditions remain the same for an extended period of time, the illustrations may seem repetitious. The benefit provided by candlestick analysis is that it is very visual. There are times when specific patterns will work extremely well in particular market conditions. When they occur, we want to point them out. This is for the purpose of educating the mind as well as the eye to recognize what are the most beneficial investment strategies during all market conditions.

The one basic truism that is often repeated is the Japanese Rice traders stating "let the market tell you what the market is doing". This has been repeated in our newsletter fairly often over the past few weeks. It maintains a lot of credibility. As noticed in our pre-market comment today, although investor sentiment has turned relatively bullish and the past couple of days, there was still cause to be somewhat guarded. The reason is simple. The market had been telling us valuable information over the past few weeks.

The Dow has shown that when it moves in one direction or the other for just a few days, a reversal of that trend follows. That has created the sideways movement for the past six weeks. What looked like the potential of the starting of a new wave to the upside had one significant deterrent. At these levels, the Dow appeared to run into resistance during the recent past. This provided some caution for getting overly bullish. The past two days of trading, although exorbitantly bullish, was still putting the market in the area that was trading sideways. When we woke up this morning and witnessed the pre-market futures down heavily, the immediate evaluation was obvious. There was not going to be an immediate breakout of the sideways choppy trading range.


Big price moves in the markets and one direction one day followed by the opposite price move a day or two later tells us what the market is telling us. Investor sentiment is still in an indecisive stage. Can you make money in these market conditions? Yes, utilizing what the candlestick signals are tell you in individual stocks. The magnitude of the profits may be much smaller. And it may be much harder to produce profits in these market conditions. At least that informs each investor what their game plan should be. Aggressive investors may have to spend more time and energy at the computer screen to make profits. The more passive investor may decide it's not worth trying to trade this market. Fortunately, utilizing candlestick analysis allows us to be able to make those decisions.

No matter which way the market is moving, individual reversal signals will demonstrate where the strong price move potentials can be found. As illustrated in our recommendation on SPIL today, it did not matter which direction the market was moving or with what degree of strength, the Abandoned Baby signal is one of the strongest reversal signals in the candlestick universe. The force in which candlestick reversal signals are formed are based upon the investor sentiment incorporated into the analysis of that trading entity. As illustrated, the strength of the Abandoned Baby signal provided the evidence required, indicating the Bulls greatly wanted to be in this position.


Candlestick Forum Online Training webinar - September 20 and 21st - Do you want to learn how to use candlestick signals effectively. The two day online training seminar allows investors to learn the correct process for analyzing and applying candlestick signals with other technical indicators for maximum results. Do not miss the opportunity to gain insights from Steve Bigalow and Rick Sadler. The combination of their scanning and trading techniques will give you investment knowledge that will benefit your investment abilities for the rest of your life. Sign up now. Seats will be limited. Click here for details.

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Good investing,

The Candlestick Forum Team

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