4 SUCCESSFUL Trading Strategies That Will Make You $400 a Day

Part 4 of Our FREE ‘How to Trade Stocks‘-Guide

Trading strategies that work

There are many overcomplicated trading strategies on the internet. We show you four simple trading strategies, together with some stock market basics,  you can use today to find success.

Important things before we start!

The price moves in waves!

If you look at the price charts, the chart has two dimensions: price and time. The more you look at charts, the more you will notice that you can split the price movement into equally long periods. That means you should always consider waiting for the next wave to happen. Be patient with your trades and wait for rises to appear.

The following chart illustrates how you can sort price movements into different waves to estimate when the price will move next.

Trade the market both ways!

Do not hesitate to go short. You can play every strategy we show below both ways (up and down). However, there are stocks where your broker might have problems to identify short opportunities. Try other brokers with different short locates so that you have the best opportunities to go short.

Volume indicates strength

The charting software of your broker will allow you to display the volume (number of shares traded) below each candlestick. Watching the volume is vital to figure out where the stock could go next. When you see a stock moving with high volume in one direction, it is very likely to continue in this direction.

Always watch the market direction!

Stocks usually follow the overall market. So it is always wise to observe the SPY, the largest exchange-traded fund (ETF) that is designed to track the top 500 stocks on the market.

There is an exception to this rule, though. Depending on how big the news for the particular company is the stock may go in the opposite direction of the market.

Always have a plan when you trade! Plan your entry, your exit, and your stop-loss area. Trading is all about risk management, and you should never risk more than you could win!

Strategy 1: Ascending/descending triangle squeeze

Suitable for
DAY TRADINGSWING TRADING

One of the most common patterns you see in stock trading is ascending or descending triangles. The triangle is formed by a trendline that is moving towards horizontal support or resistance area. Many trading guides will tell you to buy the breakout over those resistance or support zones.

However, we recommend to buy at the trendline though and anticipate the move of the price before it happens. More often then not you will see fake breakouts over support or resistance areas where price comes right back down and reverses. Hence, the chance of losing money by buying breakouts is much higher than by trying to anticipate it.

Connect 2 low points to get a trendline.
Buy after it hits trendline again. Set your mental stop-loss below the most recent low.
sell 50% (or 75%) as soon as you get 1:1 risk/reward. For example if you risked 50 cents with your stop-loss you take some of it off after you got 50 cent. After that move your mental stop-loss to your entry price and let the rest ride up.

You can take the same concept and turn it around on the move down towards a support area with a descending triangle. If the stock had a big down move before the descending triangle, there is a high chance it will fall through the support zone.

Strategy 2: VWAP fade

Suitable for
DAY TRADING

This strategy can be applied both ways. Either you wait for a pullback to VWAP (Volume Weighted Average Price) after a bullish upward move with a lot of volume, or you ready for a bearish downward movement. Watch out if VWAP kicks in as support or resistance. There is a high chance that the stock will get back to the high of the day or low of the day, depending on the direction you trade this strategy.

Heavy move down on a lot of volume not respecting the VWAP at all.
Short sell as soon as you see VWAP being respected as resistance.
Take 50% (or 75%) off and let the rest ride to low of day. Move the stop-loss to your entry price.

Strategy 3: Gap with falling/ascending wedge reversal

Suitable for
DAY TRADING

A day trading strategy that you can use in the morning. You first search for a stock that is gapping up (opens higher or lower than the previous day close price).

Let’s say you see a stock that is gapping up 8% overnight. Usually, you can see an early morning sell-off because of shareholders that were in that stock from the previous day want to take profit, so there are more sellers than buyers. You wait and see if a wedge is being formed, meaning two trendlines that meet each other, even better when this happens into a well-known support zone.

Relevant here is that the stock does not sell off to the level it was on the previous day. Once you see the price breaking the upper trendline, you buy in and ride it to at least the highest pre-market price or high of the day to take your first profit. You will also see this happening to the short side when a stock is gapping down significantly.

Previous day price close price.
Buy when you see a higher low is being formed and the stock is breaking the upper trendline. Set the mental stop below the lowest wedge candle.
Sell 50% (or 75%) of your position at high of day and let the rest ride. Move your stop-loss to your entry price.

Strategy 4: Flag breakout

Suitable for
DAY TRADINGSWING TRADING

The flag breakout is a comprehensive trading strategy. After move up or downwards on a lot of volume, the stock consolidates with a flag pattern. You draw a trendline against the initial move and as soon as is broken you build up a position and take the first profit at the high of the initial move (or at the low of the initial move when playing to the short side).

Initial move on high volume.
Buy as soon as the downward trendline gets broken. set stop loss below the low of the last wave.
Take 50% (or 75%) off and let the rest ride. Move your stop-loss to your entry price.
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