Active Trading Strategies

It is always good to choose your own trading strategy. i.e. (the strategy that best suits your style) Another important thing to be noted while choosing a strategy, is the extent to which you can take risk.

Long term traders buy and hold on to their stocks for a number of days or months.

Short term traders book their profit/loss within a day or in a few days. Traders who actively trade in the financial market adapt themselves to the market movement and use the trading strategies to maximize their profits.

Day trading or intraday trading

Day trading is also known as intraday trading. Here the trader takes a trade and gets out of his position before the market ends. He is out of his position during the market hours and does not carry any overnight positions. This is one of the most active trading strategies. Professional traders prefer day trading. The gains from a day trade may be limited and the trader may not be able to catch a large movement in a trending stock. There is no risk involved with the risk of events which may affect the stock price after the market hours.

Positional Trading

Positional trading is holding on to positions for days or even months. They normally grasp the start of a trend and hold on to the stock till the trend breaks. The advantage of this kind of trading strategy is that the trader can capture huge profits if the price moves in his direction. He is also able to capture the gains from gap up openings that take place during the pre market hours. The other side of this trading strategy is that the trader will always be worried about any unexpected news or any global event that may happen during the non market hours.

Swing Trading

Swing trading is a technique of trading with an objective of generating profit from price changes or swings of a stock within one or several days. Swing traders are not usually concerned in the built-in value of the shares, rather they focus on the price trends of the shares that are determined by technical analysis of stock market charts, which help them identify the stocks that have some price momentum going on.

Swing trading being similar to day trading is a speculative based trading that relies heavily on the market trend and technical analysis for a successful trading.

Scalping Trading Strategy

Scalping is a very active trading strategy which is usually done by traders who look to capture small price movements in a stock. They try to capture the spread that causes price gaps. These spreads are caused due to speculation. The Scalping strategy is followed by aggressive traders who catch even small price movements and expect huge returns if done in a organized manner.

Fading Strategy

In this strategy, traders short the stock after it moves up rapidly. They assume that the stocks are overbought and that those buyers who may have taken the stock early would start booking profits. Although risk is involved in this strategy, it is also very rewarding.