Intraday Trading remains one of the most popular forms of trading till date. However many people are unsuccessful in intraday trading because they don’t follow any fixed strategy and take trades on their own mood.
Lets understand some of the most popular Intraday Trading strategies for beginners which can help you successfully earn money from stock markets. Before learning the strategies, let me tell you another very important factor that determines your success in intraday trading – Risk management and Money management. Strategy will only help you generate consistent returns if you are managing your risk and following trading rules
#1 Open High Low Strategy
Open high low strategy is one of the easiest and best intraday trading strategy for beginners to start with . Although accuracy rate varies from 50-70% , if done with proper risk management and money management , this strategy can help you succeed in Intraday trading.
According to OHL strategy , we wait for 10 minutes after market open and then check for stocks where open is equal to high or open is equal to low for the dat. When open = high for the day after 10 minutes, this means that stocks started falling with high selling pressure as soon as market opened. Also stock has not crossed the highest point of day after 10 minutes which will naturally act as resistance for it. Such stocks are candidates for short selling and should be shorted around VWAP (volume weighted average price)
Similarly when Open = low , this means that buyers started buying that stock as soon as it opened and if even after 15 minutes open is equal to low , it means that low point has not been breached for the day . Such stocks can be bought for day keeping days low as stop loss. However make sure your buy it around VWAP and not very far away from VWAP.
You can find many screener for open high low strategy but out favorite is IntradayScreener.com ‘s Open high low scanner that can be accessed here. It gives you open high low stocks with dats range as well as volume weighted average price (VWAP) .
#2 Moving Average Crossover Strategy
Moving average crossover strategy is another great beginners intraday trading strategy . A moving average crossover occurs when two different moving average lines cross over one another . Moving average crossover strategy is based on simple fact that smaller moving average will follow price faster than big moving average (example 5 SMA will follow price faster than 20 SMA) and when crossover happens , we can have a small trend formation till reverse crossover happens.
Since we understand that moving averages are a lagging indicator, the crossover strategy will exactly not capture exact tops and bottoms. But it can help you identify the formation of trend and take trade in that direction
Lets understand this by an example . on 15 minutes timeframe of Nifty below , we can see 5 SMA (red line) and 20 SMA (blue line) . When 5MA crosses 20MA from above (negative cross) , we have a sell signal. We initiate a sell trade with lets say .5% as Stop loss and 1% as target. Exit can also be done if 5 MA crosses 20 MA from below (positive cross) .
This is a very basic strategy which works well with trending stocks. So to make the signals accurate, we can have small filters like ADX more than 25 . If you dont know what ADX is , you can read this article on What is ADX indicator and how to use ADX
The most common moving average combinations that are used by traders are below
5,20 SMAfor 15 minute and 5 minute time frame
50, 200 SMA for 1 day timeframe
#3 Breakout Trading Strategy
Breakout trading strategy is one of the most popular day trading strategies which can help to select good intraday stocks. In this strategy , we focus on stocks that move above or below specified levels with increase in volumes. These levels are called support and resistance levels and once price moves above resistance levels, it continues to go up. Similarly if price falls below support levels, then you can take short position in the stocks assuming price will move downwards.
Another easy day trading strategy based on breakout trading strategy is range breakout trading strategy. Example stocks that are breaking 30 day range with high volumes can show good movement in intraday and positional trading. Once the stock price starts trading and sustaining above 30 day or 90 day highs and low with volume additions, volatility expansion stakes place and further buying or selling will happen causing stocks to move up and down.
How to select stocks for Breakout Trading Strategy?
You can use Intradayscreener.com for selecting stocks that are breaking out of a range in markets. When such stocks which are breaking out of range occurs with increase in open interest and increase in volumes, further move can happen. Click here to visit Intradayscreener.com and access range breakout scanner
#4 Momentum trading strategy – trend trading
Momentum trading strategy is one of the best trading strategy that should be followed by beginners intraday trading strategies. this is one of the best day trading strategy which has high chance of success.
Momentum trading means finding out stocks that are moving from past few days or weeks. Such stocks keeps on moving unless clear reversal signs happen. If we catch such stocks early , we can ride the trend and make profits out of these stocks.
in the above example you can see when bank nifty broke a resistance level and took momentum, it went much higher. Such trades are called momentum trade where we catch such moves and ride these movements. You can also use a 50 period simple moving average to make sure that the momentum or trend is intact .
#5 Pull back trading strategy
Pull back trading refers to a trading style in which we enter a stocks on correction or pull backs. When a stock is moving in Uptrend or downtrend, it will have small moves which will be opposite to direction of major trend. Example if a stock is moving in uptrend, it may occasionally pull back and show some correction before resuming its major trend. Similarly is a stock is falling , it may show some bounce back and then resume its downtrend move.
Pull back trading refers to trading style in which we catch the stocks on correction (in uptrend) or bounce back (in downtrend). Lets understand it with help of example