Day trading has become a popular trading option among buyers. Many people have tried day trading during the pandemic for profits and entertainment. Hence, the market saw a good upsurge in 2020.
However, day trading is a tough task. If done right, it can be a lucrative way to earn profits and money. If not, there are risks that can cause major downfall too. Put simply, it requires a deep understanding of the market to be successful in this trading sector.
Day traders often look for a holy grail strategy for profitable results. But is there any such strategy that can turn the tables for them? Let’s find out:
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What is the Holy Grail in Trading?
If you are a beginner/novice, you must be wondering what exactly is a holy grail. In the trading industry, the holy grail stands for any strategy, indicator, or system that can ensure higher profits regardless of the market. This means a stock or forex holy grail concept can assure you of 100% accurate prediction/analysis for winning trades.
But does the holy grail exist? Not really! There is no such method in the trading industry that can assure you of 100% money-making. Yes, there are several profitable strategies that may work wonders, but you wouldn’t find “the” perfect one.
Profit and losses to any particular strategy differ from trader to trader. It depends on the factors, including weakness, strengths, traits, and persona of the trader.
Remember, no one can predict the market entirely. You’ll have to apply your best possible strategies and limit losses if any blunder occurs. That’s how day trading or any trading works.
There might be no holy grail in trading, but there is a trading pattern that’s named holy grail for its simplicity.
Holy Grail Trading Pattern
A Holy Grail trading pattern is a strategy that was introduced by market wizard Linda Raschke. It uses two indicators:
- Average Directional Index or ADX– indicates the strength of the trend
- A 20-period Exponential Moving Average or EMA– indicates trend direction over the time period
As a trader, you’ll first have to check the trend strength through the ADX indicator. If the ADX reading is more than 30, it indicates a strong trend.
Next, you must look for the first pullback or retracement to the EMA. During this time, the ADX may become low. But it shouldn’t go lower than 30. Anything lower than 30 is a big no-no.
To start off, you must use the first candle high that reaches 20-period EMA. If the candle break occurs at a higher point, you can start buying. All this time, things should be above 20-period EMA.
Lastly, put the stop loss below the retracement low. Now, you can either trail the stop loss below the 20-period EMA and go with the trend or take profits to the latest swing high.
Although the holy grail trading strategy is quite popular, you can’t call it perfect. The market keeps evolving, and there is no particular strategy that works for all.
Tips for Successful Day Trading
To become a successful day trader, you’ll need years of experience and an understanding of the market. But, if you are a beginner, you should try to keep up with the latest news and events that affect the market.
Some other tips that may help include:
Take Your Time
There is no such thing as “rushing” in day trading, and you must understand that. For day trading, you’ll need time to track the market. So, it’s going to be time-consuming.
Take your time and keep your eyes on the ups and downs. Once you find the opportunity, grab it.
Keep it Low
It’s highly recommended not to go overboard with the stocks. Start off small and increase as you gain experience. You can also start trading with fractional shares as a beginner.
Understand the Profits
In online trading, a 100 % successful strategy is a myth, and you must understand that. If you want to grow in day trading, you must limit your financial risk on trades. Make sure it’s restricted to a particular percentage of your account with clear entry/exit.
Timing is Important
Don’t take the position during the first hour of trading, as the market is quite volatile in this time period. You’ll find a lot of noise, plus there’ll be fluctuations. Rather, it’s recommended to try day trading at noon, after 1 pm.
To Conclude
There is no such particular day trading holy grail in the market. To get profitable results, you must understand the technicalities of the process and act accordingly. You must also focus on other crucial aspects like risk and money management for the best results.