Guide to Day Trading Strategies

H O W T O D A Y T R A D E
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Chart of a stock showing the days with big volume. Those were 
the days this was a stock in play for day traders.
Stocks must have Volume
As day traders, we look for stocks that are trading on above average volume. On any given 
day, algorithmic trading computers account for more than half of the volume in the market. If 
we see a stock that is trading on below average volume, it is safe to assume that day traders 
have very little interest in that stock and that the majority of the volume is controlled by high 
frequency trading computers. These trading computers will buy and sell shares which will result 

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R O S S C A M E R O N
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in volume and chart patterns. The problem for day traders is, that when we look at these charts 
and recognize a familiar pattern, we can be fooled into thinking it is a good buying opportunity. 
A good looking setup is never complete without above average volume. We need above average 
volume to con
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rm that thousands of other traders are watching this same chart. When we are 
watching a setup forming and we expect a breakout to the upside, that breakout is the result 
of thousands of traders all buying up shares. In fact, we are one of those buyers! That means as 
day traders we should only trade stocks other people are trading.
There are a few techniques for making sure we are trading the right stocks. The most obvious 
technique is to simply look at the daily volume. If a stock trades an average of 500k shares per 
day and has already traded 2 million shares, there is above average interest. The other option is 
to use stock scanning software to scan for stocks with high relative volume. The relative volume 
for the day is translated into a number, a ratio. ‘1’ is average and ‘2’ being 2x average. Stocks can 
trade on any multiple of relative volume, so anything above a ‘2’ is interesting.