What is Day Trading in Nigeria?

How to develop an effective day trading strategy

👉 Most novice Nigerian traders begin by studying the trading tactics used by established traders before they develop their own trading strategies. Nigerians can start developing a strategy by ensuring that they have the right expectations.

👉 While it is easy to develop a trading strategy and learn the tools and indicators, it is not realistic to expect your trading strategy to earn you a profit from the start. It is challenging to find an objective trading edge and Nigerian traders will realize that profitable trading involves more than just a good strategy.

👉 While Nigerian traders can seek the advice and guidance of more experienced and successful traders, no guarantee following any of this will earn you a profit.

👉 Every trader is unique, and their situation is different, thus traders can only benefit when they have a mix of unique and personal trading tools to accommodate this.

👉 To develop a unique and personalized trading strategy, Nigerian traders can follow these steps:

➡️ Form a market ideology

➡️ Choose a market in which to use the trading strategy

➡️ Choose your timeframe

➡️ Choose a tool to find the trend or the lack of a trend

➡️ Define the entry trigger

➡️ Plan the exit trigger

➡️ Define your risk exposure

➡️ Write your trading rules down on paper

➡️ Backtest your strategy

➡️ Evaluate how you can improve your strategy

Form a market ideology

👉 You must have a general understanding of how the market works before you can even begin to formulate your own trading strategy, and in addition, you must therefore respond to this question:

➡️ “Why do you believe that you can earn money from trading in the markets?”

👉 Through extensive reading, you could form your own market philosophy. Learn both technical analysis and fundamental analysis by reading about them. Stay away from promises that might make you wealthy fast and consider the market’s demand and supply.

👉 Questions should be raised about the validity of ideas that assert that individuals are completely rational. Your philosophy will determine the course of action that is taken and therefore you must consider it and focus on its need.

👉 Maintain as much simplicity as you can because you do not want to be completely flummoxed by an intricate plan just as you are getting started. In addition, it is more difficult to monitor and enhance a trading strategy that has a greater number of moving pieces.

Choose a market in which to use the trading strategy

👉 If you decide to engage in foreign exchange trading, it is important to be aware of what you are buying and selling with a currency quotation. You must also educate yourself on the many types of forex brokers and learn the formula for determining the margin.

👉 Or, if you want to engage in equity trading, you should be familiar with the concept of a share. In such instances, for instance, one must be aware of the distinction between a blue-chip stock and a penny stock.

👉 The idea to take away from this is that there is a great deal to learn about each market. But until you choose a trading market to specialize in, you cannot even begin your in-depth education. The only guideline is that you must have a thorough understanding of the market you want to trade in.

Choose your timeframe

👉 It might be difficult to settle on a trading timeframe before you have gained any expertise in the market. You will not be able to determine if rapid scalping or daily swing trading is better suited to your trading style.

👉 Therefore, you should begin by thinking about the conditions in which you find yourself. Try your hand at intraday trading if you can keep track of the market for extended periods.

👉 When you trade on rapid time frames, you receive feedback quickly, which cuts down on the amount of time you must spend studying.

👉 Even if you wind up trading for extended periods, the knowledge you get by studying intraday price movement will still be beneficial.

👉 Naturally, if you are unable to keep an eye on the market for extended periods, you should begin with the charts after the trading day has ended. You can study enough about swing trading to determine whether it is right for you if you put in the effort to do it consistently.

Choose a tool to find the trend or the lack of a trend

👉 When you notice a pin bar, you should refrain from making any trades. You enter a trade when there is an upward trend in the market, and the trigger for your trade is a bullish pin bar.

👉 When you come across a “Gimmee Bar,” you should not engage in trading. When you believe that the market is likely to move in a sideways direction, you should join the market by trading using a Gimmee Bar.

👉 Choose a tool that will assist you in evaluating the current state of the market, such as whether it is trending, whether it is going up or down, and so on.

👉 Price action tools such as swing pivots and trend lines are available for you to pick from. You might also make use of technical indicators such as moving averages and the moving average convergence divergence.

Define the entry trigger

👉 Even if the circumstances around the market are favourable, you still need an objective entry trigger. You will not have to second-guess your decision to join the market because of it.

👉 Triggers can be found in bar patterns as well as candlestick patterns. If you prefer oscillators over indicators, the relative strength index (RSI) and stochastics are also excellent choices.

Plan the exit trigger

👉 You must have a strategy for how to get out of the situation in case things go bad. The market might turn against you, resulting in losses that are incomprehensible to you at this point.

👉 Therefore, whenever you trade, you should always make use of stop-loss orders as well as take-profit orders.

Stop-Loss

👉 A stop-loss order is a limit order that reduces the risk of a transaction. It is any Nigerian trader’s closest friend if they want to stay in business and realize the earnings that are potentially available to them over the long run.

👉 Stop-loss orders provide most traders with a sense of security and peace of mind. However, they often do not put a lot of effort into the process by which they establish their stop-loss orders.

👉 The level of risk that traders are willing to take does not imply a rational stop-loss threshold. It is brought to light by the price activity in the market. Traders control their exposure to risk while maintaining breathing room for our trades by using stop-loss levels that are determined by price movement.

👉 Support and resistance levels as stop-loss orders and volatility stop-loss orders are the two basic approaches for locating stop-loss points by using price movement.

👉 In a perfect world, we would want the market to avoid our stop-loss point. Therefore, it makes sense to use support levels as stop-loss points when setting up long trading strategies.

👉 The same principle applies when determining where to place stop-loss orders for short trading setups based on resistance levels.

👉 Minor support and resistance may be seen in the form of candlestick patterns and bar patterns. When trading using price patterns, it is important to set your stop-loss order below (or above) the pattern.

👉 In terms of a Volatility Stop-Loss, the perfect stop-loss allows for some wiggle room in a transaction but still prevents it from being exceeded. Thus, what would an acceptable amount of room, or price range be?

👉 The answer is going to depend on how volatile the market is. Therefore, considering the volatility of the market price movement is another sensible way of determining where to place stop-loss orders.

👉 The Chandelier Stop is regarded as the prototypical illustration of a volatility stop-loss order. As a measure of the volatility of the market, it employs the Average True Range (ATR) indicator. After that, it sets a stop-loss order that is determined by a multiple of the ATR.

Take Profit

👉 The practise of “taking a profit” is one of the aspects of trading that is discussed the least. This is the usual progression of the learning cycle:

➡️ The trader believes that the trade entrance is the only important thing, and subsequently, they fail to establish take profit levels.

➡️ The trader exhausts their trading money and then realizes that they have neglected their stop-loss orders, which prompts the trader to start concentrating on their stop-loss orders.

➡️ When the trader watches his fake earnings disappear over and again, he becomes more agitated. Then and only then do they understand that while they have an exit strategy for transactions that are going against them, they do not have one for deals that are going in their favour.

👉 Unfortunately, a trader will never be lucrative if they do not know how to properly take profits. You can no longer afford to disregard this essential facet of the trading process as it will lead to great and unnecessary losses.

👉 Some of the best techniques that Nigerians can use for taking profits from their trade are:

➡️ Chart Pattern Target Projection

➡️ Fibonacci Extension

➡️ Past Swing Pivot

➡️ Parabolic SAR

➡️ Chandelier Stop

➡️ Reversal Signal

Define your risk exposure

👉 After you have determined the criteria for entering and leaving the market, you can next focus on reducing risk. Position sizing is the key method for accomplishing this goal.

👉 The amount of money that you are willing to risk in a certain trading scenario is directly proportional to the size of your position. If you increase the amount of your stake, you will subsequently also increase your risk, which is why you should closely monitor the size of your position.

Write your trading rules down on paper

👉 Your trading technique is straightforward at this point in the process. While you could commit the trading rules to memory, you should nonetheless write down the trading rules that you aim to follow.

👉 Having a trading strategy that is written down is a reliable approach for ensuring both discipline and consistency. Additionally, it offers a record of the trading method you use and when you are attempting to perfect it, you will realize that keeping a trading journal is especially important.

Backtest your strategy

👉 You may now backtest the approach once you have the rules laid out. Backtesting might be a laborious procedure if you choose a trading strategy that relies on your own judgement.

👉 You must record your transactions manually while replaying the price motion of the market. You could get through this step more quickly if you have prior experience with coding and a mechanical trading approach.

👉 However, Nigerian traders who do not have such expertise might utilize tools such as MetaTrader to back-test their approach by making use of a demo account provided by a forex broker.

👉 No matter how you choose to back-test your technique, going through each transaction one by one is an excellent method to hone your market sense and improve your trading results. Taking these steps could also assist you in producing ideas to enhance your trading approach.

Evaluate how you can improve your strategy

👉 You should not expect to make money with your first trading approach. However, this is not a problem since your trading strategy is a living entity and does not have a fixed form.

👉 Your trading strategy will continue to develop along with your experience and expertise as they expand. You can plan how you will enhance your trading strategy by using the feedback you get, and you should also put your trading technique through forward testing.

👉 In addition to this, you should make it a point to plan to keep detailed records of your market observations and transactions, as well as to maintain an organized set of chart pictures. In addition, you should avoid making sweeping adjustments to your trading technique.

👉 Remember that your goal is to obtain positive expectations with each transaction, not positive profits for each deal, even when the last stage seems like it may take and exceptionally long time to complete.

👉 However, you should never try to force your will on the market. Instead, you should always let the facts work for you.