How to use technical analysis for day trading?

Traders use both fundamental and technical analysis when trading financial assets. Basically, they consider the price action and how the other traders are affecting the market. They also analyze the current and future economic news and data.

But if there are no external factors like the economic news, then day traders turn to technical analysis. This means day trading technical analysis. They use technical indicators to determine the market’s sentiments.

Luckily, some day traders have been successful with technical analysis alone. In fact, they use very few top technical analysis indicators to predict price movement. To help you get started, we will elaborate more on day trading technical analysis.

What is technical analysis in day trading?

Technical analysis in day trading includes searching for some technical signals in a chart that can help you predict future price trends. Generally, it focuses on changes in price and not the reason for the change in trend. It helps traders spot exceptional trading opportunities by simply analyzing the statistical trend.

Unlike fundamental analysis, it focuses more on the traded volumes and price movement. It doesn’t examine the value of security by focusing on a company’s earnings and sales. Therefore, any trader who doesn’t understand day trading technical analysis makes a loss.

After all, technical analysis can quickly help you detect short-term price movements.

Understanding Analyst Ratings

Unlike the traditional rating, which kept things simple, the current stocks analyst ratings scale can be a bit challenging. The conventional stock options technical analysis scale classified shares as “sell, buy, and hold.” But the analyst rating scale features the following terms:

  • Buy, also known as analyst strong buy stocks rating, is an analyst strong buy recommendations.
  • Sell refers to a strong stock selling rate.
  • Underperform or moderate sell is a unique underweight rating.
  • A hold rating shows that the market will be neutral, so you don’t have to trade.
  • Outperform rating shows that the stocks can have high returns.

What are the best technical analysis indicators for day trading?

Market analysts publish reports on how specific stocks will perform. But before you find out what are analysts saying about the stock market, you should study the charts. To confirm their predictions, you can use the following technical analysis indicators:

  • RSI (Relative strength index): generally, this indicator moves between a hundred and zero while plotting the recent price loss against price gains. It’s the best option for gauging the strength and momentum of a trend.
  • OBV (On-balance volume): the OBV functions by subtracting the down volume of a particular stock from the up volume. It determines the up and down flow of a stock’s volume over a specific time. When the OBV drops, the sellers overpowered the buyers and vice versa.
  • MACD: this indicator can help a day trader determine if they’re dealing with a bearish or bullish market. When it’s above 0, then it’s a bullish market. Check out our MACD Divergence indicator for Thinkorswim HERE

Thinkorswim Technical Analysis: Tips and Tricks for Analyzing Options

Unlike some platforms, thinkorswim is full-featured with everything you need to trade. So here are a few thinkorswim options analysis tips that can help you get the most out of this platform:

  • Use trade flash: a trade flash is a unique tool that can help you analyze options thinkorswim. This tool may help you detect some higher-than-usual volumes being traded that can affect the market price.
  • Check its volatility: you can focus on the implied volatility with Thinkorswim analyze tool, which confirms if other traders are expecting financial assets to move a lot or not. Low implied volatility will always mean that the premium will be low, making it the best time to buy options.
  • Identify the market-wide events that can have a significant impact on the stocks: certain events can affect the implied volatility of a stock before the occurrence.

The Trading Analyst Options Review: It Is Worth the Investment

Even though they can be very risky, options serve as the best hedging methods used by experts. Generally, purchasing options can be relatively riskier than equities, but at times they can help reduce risk. After all, they do require less capital than equities; plus, if done correctly using technical analysis for options, they have higher potential returns. Check all of the Proprietary Trading Indicators for ThinkorSwim HERE



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