Mastering Day Trading Strategies: Riding the Trend

In this article, we will be discussing about mastering day trading strategies. I would suggest you to go through the article how to trade with supply and demand zone? article before going forward because some of the logic of this article relates to supply and demand zone as well.

What role does trend analysis play when day trading?

Day trading with opposing trends or within trendless scenarios or weak trending periods may produce unsuccessful trades. When traders enforce strong trends they have more chance to make successful trades.

Specific patterns of price bar movements alongside pullbacks create conditions which make supply and demand shifts more probable. It is difficult for a trader to predict weak trend . When price bars and pullbacks fail to exhibit consistent patterns they decrease the probability of supply and demand shifts. At the accumulation phase smart investors purchase stocks to reduce market availability. clear trend, or when the trends are weak can often lead to unsuccessful trades. Good, strong trends are more likely to result in successful trades.

When the price bars and pullbacks follow a predictable pattern, it is more likely that changes in supply and demand will occur. Weak trends are less predictable. If the price bars and pullbacks do not follow a predictable pattern, it reduces the likelihood of a change in supply and demand.

MARKET STRUCTURE AND IT’S UNDERSTANDING

The price moves through four phases:

1. Accumulation (sideways market)
2. Uptrend (going up)
3. Distribution (sideways market)
4. Downtrend (going down)

1. Accumulation (Sideways Market)

During the accumulation phase, smart investors buy stocks, which reduces the available supply. Various traders begin to accumulate when the market demonstrates a prolonged declining phase followed by a horizontal price development.

In a sideways market, prices keeps on trading between Support and Resistance levels, not moving much. In accumulation:

• Candlesticks are normal or narrow.
• Green and red candles appear alongside one another in this period.
• Trading volume is low.
• It takes time.
• Prices stay in a tight range.

Over time, more traders buy near the lows and sell near the highs, leading to stops building up beyond the range.

How to Enter the Accumulation ?

The number of traders who purchase near support zones increases throughout time while selling at resistance zones thus extending stop losses outside the current trading range. The market has a higher probability of moving upward once the range’s lowest values match up with a support area shown on a larger time frame. The market shows no guaranteed sign of reversals right now. Market traders should notice bear strength weakening as this creates conditions for bull domination that pushes prices above recent peaks. The current chart demonstrates solid confirmation through triple bottom formation. Key rule for support and resistance is that when price hits resistance level multiple times it gets weaker, and in below chart at 4th attempt gives breakout upside.

2. Uptrend (going up)

The market participants who know what they are doing drive prices upward at speed. Prices during an advancing phase show an uptrend pattern by rising in both directions. Market prices display both ascending and descending movements.

A healthy bull trend shows ascending price trends which exceed downward trends in duration and create both higher extreme points and stock levels while bearish trends show opposite price movements.

Price simultaneously establishes both higher High (HH) and higher Low (HL) points during uptrend of market.

Generally in the advancing stage:

• Price activity shows more bullish trade signals than bearish ones.
• Large bullish candles extend beyond smaller bearish formations in price charts.
• During upward motions volume expands yet it contracts when prices reverse direction.

During the forward phase the market must pause since the first group of investors starts taking profit while market sellers begin initiating short positions when prices reach favorable levels.

Below are different types of trends in market

• Strong trend
• Healthy trend
• Weak trend

Strong uptrend

• During a strong uptrend market conditions remain under strong buyer control while sellers face minimal resistance.
• The market demonstrates sidewise market with pullback followed by low-volume activity throughout this period.
• Barely retracing beyond the 20 EMA or better to mark big bullish candle low as support from where high chance of market going upside.

The market resists retracements so consistently that entering pullbacks becomes challenging. To effectively trade this trend wait for the price to break out.

Healthy Trend

During healthy uptrends both buyers and sellers operate simultaneously while sellers maintain nominal control because of traders taking profits along with those who initiate counter-trend setups.

This trend pattern should experience an important retracement that will stop near or at the support level which becomes a suitable point to enter the trend. Also, the area with pullback with narrow range or lower wick candle.

Weak uptrend/choppy trend

• A weak uptrend shows nearly equal power between buyers and sellers yet the buyers maintain a subtle advantage.
• Steep market pullbacks combined with trading above the 20EMA should be expected in this market condition.
• Normally there is a choppy price action i.e. market is not clear so during these case wait for big bullish candle.
• The market frequently breaks out from its highs before retracing dramatically downward which leads to potential false breakout signals.
• Minor up (down) trends frequently intersect through pullback formations at regions tagged as supply (demand) points.
• Open prices start from 50% or more of the previous bar range’s total area.
• The current close price might avoid moving toward the direction of the previous bar.
• A new bar avoids opening its price around the boundaries which results in short or long tails.
• Display uncertainty in the market as price action is not clearly distinguishable during these period.

The proper and profitable method to access this trend involves suitable support entries or resistance entries.

3. Distribution

After stock prices rise during a rally SM utilizes the elevated value by reselling stock to unknowledgeable traders/investors. Always remember : During distribution and decline phases all information operates in reverse order.

4. Downtrend

During downward trends prices tend to create both Lower Highs and Lower Lows. (LL)

When does a trend end?

A trend comes to its expiration when prices create two points with decreasing highs along with two points with declining lows within a specified time window. A downtrend ends officially after the stock forms two higher lows and two higher highs within a specified time period.

Risk runs high in day trading alongside the possibility of fast financial losses. Real financial commitment requires prior practice in simulated conditions and complete market comprehension. Your success requires continuous education about market changes and staying aware of all current developments.

Conclusion

Mastering day trading strategies requires good technical knowledge and strong discipline. Patience while you trade combined with skilled risk management and mistake analysis will guide you toward successful trading results for beginners as well as experienced traders.

Disclaimer: Information given in this document serves only educational functions thus it does not provide any kind of financial guidance. The practice of trading carries inherent financial dangers so trade with caution at all times.

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