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The following are basic strategies used by day traders. Some of these strategies require short selling stocks instead of buying them long. There are a few challenges to short selling stock which include your broker not having shares which you can short or the stock might be restricted from being shorted on that exchange.

Trend Trading

Trend Trading is a strategy where it is believed that a stock that is rising will continue to rise, or a stock that is falling will continue to fall. You enter the trade in the direction of the trend and exit once the price breaks this trend. Trend trading usually incorporates the use of trend and support/resistance lines. Click here for more information on Trend Trading.

Contrarian Trading

This strategy assumes that prices that have been rising or falling at a high rate of momentum will reverse and start going to opposite direction. The basic idea is that you are trading in the opposite direction as the masses. Click here to learn more about contrarian trading strategies.

Channel or Range Trading

Range trading is a strategy that assumes a stock’s price will continue to trade inside of a price range or channel. Traders using this strategy will buy long when the price is at the lower end of the channel and sell short when prices are at the upper end of the price range. Click here for more information on range trading.

Scalping

This trading strategy used to be defined as spread trading where you would take profits where small gaps expanded and contracted between the bid and the ask price for a stock. This strategy has now evolved to include technical indicators, support/resistance levels, and volume spikes to make round-trip trades lasting seconds to a few minutes. The basic idea of scalping is to take advantage of market inefficiencies using speed and high trading volume to create quick profits. Click here for more information on scalping.

Trading Rumors and News Events

This strategy is mostly only done by day traders. It requires that you have access to one to several real-time news sources and can make split second decisions. News and rumors can provide large amounts of volatility and high emotion creating great opportunities if traded properly. The biggest challenge of trading this strategy is anticipating the market’s reaction to the news and how it effects the price of the stock. Click here for more information on trading news and rumors.