Stock trading strategies for beginners

This article contains some of the basic concepts needed to understand these strategies and give you an idea of what they are. If you decide to go further into them, you know what areas to research more deeply; view website for more information on trading stock.

Day trading

Day traders make money by buying low and selling high within the same day. It would be best for people who can pay close attention to stock movement throughout the day. The one bad thing about day trading is that you need to keep your money readily available to be used to buy stock. There are three strategies for day traders – breakouts, range trades, and pullbacks.

Breakout day traders

Breakout day traders are looking for stocks that are starting to rally or breakout of a price level, then buying them on the open market at whatever price they’re offered. They’ll hold onto these stocks until they reach their target goal, which will hopefully be when they start selling off again after being overbought.

Range trading

Range traders look to purchase stocks once they have seen a 20%+ rise from lows. You need at least a few days where the stock is selling off. These traders are looking for the end of a bull market run where the momentum has run out, and it’s time to sell high or go short.

Range trading isn’t just one strategy within itself; there are several different strategies that range traders can follow when deciding when and what stocks they want to trade.

20-day breakout strategy

The first one we’ll go through is the 20-day breakout strategy which is just as it sounds, where traders will purchase a stock once it has rallied at least 20% from its low within 20 days.

BB squeeze strategy

Another range trading strategy that some people like to use is the Bollinger Band Squeeze Strategy or BB squeeze for short. It starts with setting up two lines on your chart that are 21 periods apart. You then note what number you’re currently on, ensuring that it doesn’t correspond with either of the two lines. Once you have done this, you wait for a candle to close above one of the bands, then purchase shares when the next candle closes.

You also have support and resistance on the other end of the spectrum. These are basic levels to any trader because traders tend to decide if they want to continue holding onto their stock or take profits. We typically like to buy stocks once they’ve reached a specific support level – this is because we know that once the price reaches said support level, it’s highly likely that it will bounce back soon. Inversely, we wait for confirmation before going short on a stock (waiting until evidence of a downward trend forming before betting against it).

Moving averages

Another strategy used within range trading is the moving average strategy. This strategy starts by purchasing stock once it has closed above its 50-day moving average (in other words, breakout day). Traders will hold onto the stock until it reaches its target price, at which point they will sell off their shares and then wait for another opportunity to buy in again.

Pullback day traders

Pullback day traders are waiting for stocks to come down after their 20%+ rally, but before they come down to their oversold bounce levels. They’ll look to purchase these stocks when they reach specific predetermined price points to maximize potential profits while minimizing risk.

These traders are looking for low-risk entry points because they can get out without losing much money if the selling continues. The 5-minute chart is where pullback day traders will do most of their stock shopping because it has smaller price fluctuations, making entry points easier to come by.

This strategy starts with finding the stock’s 10-day high and placing a sell stop 1% below it. Traders can either hold onto these shares until the next time there is a 5-minute rally or place another sell stop 1% under the current low if they want to lock in profits. The following strategy we’re going to talk about is called range breakout trading.