In today’s blog post we are going to focus on developing an entry strategy into your day trading toolbox. A good entry strategy is important because when and where you enter on a stock can have a huge influence on your bottom line. As you have probably already figured out by now, some securities are better candidates than others for day trading. That is because a day trader should be looking for two things when looking for a good stock for day trading and that is liquidity and volatility.
Stock liquidity is how easy it is to buy and sell a stock without seeing a change in the price. Good liquidity will allow you to enter and then exit a stock at an advantageous price. For example, if you buy stock “A” at $20 a share and can sell it immediately for the same price, the market is perfectly liquid for that stock. If you cannot sell that stock at all, it would be perfectly illiquid. These examples happen very, very seldom. More often than not the market for a stock is somewhere between the two extremes.
Stock volatility is the measurement of the expected daily price range. This range is the area in which the day trader has to learn to operate to make a profit. Successful day trading requires you to get comfortable operating in this range. The higher the daily volatility for a stock, the higher the potential for profit or loss.
Now, that you have learned how to evaluate a stock’s liquidity and volatility, you need to find your entry point. All momentum day trading strategies need to include a good entry point strategy. Intraday candlestick pattern’s and charts are a great way to find an appropriate entry point.
Intraday Candlestick Pattern
A candlestick chart shows a stock’s price at opening for that day, its intraday high price, its intraday low price, and its closing price all on one graph. At first glance the chart my look confusing, but it is an essential tool to learn for day trading. Learning how to read a candlestick chart will help you find patterns and those patterns will help you identify an entry point.
Everyone who day trades, knows that news makes stocks move. You can make all the intraday candlestick patterns in the world but if you do not have a good, reliable, real time news source you could get caught behind the bell curve. Twitter is a great way to get up to the minute news information. You can follow all the standard news channels but we also recommend following Warrior Trading. They share great up to the minute news that you are going to want to know about.
Any serious day trader knows that picking the right entry point is one of the most important skills you can develop as a day trader. The good news is there is no secret to it, you just need to learn how to use the information to your advantage. If you would like to learn more day trading strategies head on over to Warrior Trading .They have tons of great strategies and advice for both newbie and advanced day traders. Good luck out there!