There are many types of stock trading in the financial market. Traders choose these trading strategies depending on their expertise and ability to meet financial goals. One of the most popular ones is active trading. It refers to buying and selling stocks throughout the day before the market closes at night. This strategy is mainly implemented by indexed investors or passive traders who follow the buy-and-hold strategy.
While there are several methods to accomplish active trading, each is associated with its own market risk and environment. However, despite this fact, many investors in the stock market still follow the four common active trading strategies, which will help them get ahead of the curve.
Day trading
Day trading is one of the most active and popular trading strategies implemented by almost everyone in the financial market. It is a pseudonym for active trading. It involves buying and selling stocks in a single day without waiting overnight or for a prolonged period to monitor how the stock does in the market.
Generally, stock positions are closed in a market within the day, and day traders do not hold on to their stocks overnight. As a result, this strategy is generally popular among market makers. However, in recent times, the electronic trading option has made it easier for novice traders to access this type of trade.
Position trading
This essential trading strategy follows the buy-and-hold concept but is not associated with active trading. Position trading refers to using charts and studying the market details daily or monthly, in addition to other methods of trading, which involve the market trends in the right market direction. The position of the stock is held in the market for several days or weeks, depending on the market’s trend.
Traders generally monitor the higher highs and lower highs if they want to determine the security trend. Traders of this type generally aim to take advantage of both sides of the market movements.
Swing trading
Swing trades get in the trading game when a market trend breaks. Between the establishment of a new trend and the end of the old trend, there is generally price volatility, and swing traders generally step in during this time to buy or sell their shares in the trade market. Then, based on fundamental and technical analysis, they hold their stock positions for over a day. There are many tools and algorithms for swing traders which determine when they should sell or buy a stock.
Scalping
It is one of the quickest strategies of active traders, which is essential to identify the bid and ask spreads. As a result, they become much narrower due to temporary market imbalances. However, this strategy needs to exploit the more significant moves. As a result, the profit level from this strategy is significantly trim, and hence traders use liu=quid markets to enhance their profits and frequency of trade.