Successful trading requires a general understanding of the stock market. Without knowing all of the options available, it is difficult to select an approach to trading mindfully. Ideally, trading should be conducted with an end goal in mind. Consistent trading activity will most likely lead to the achievement of preset investment goals. Here are a few common approaches to active trading and how to determine which is most appropriate for specific intentions.
This may be the most overused term among novice investors. Moreover, the term day trading is often misused or misunderstood. Essentially, the act of trading within a single stock or other investment vehicles within one trading day could be considered day trading. This form of active trading is meant to produce short term gain by accurately timing the rise and fall of specific market activity as it relates to a particular company or series of companies. Day trading is a broad approach to active trading and is subject to the interest and desires of the investor.
Swing trading is another approach to active trading. This format definitely requires some advance research, since movements will depend on upcoming or receding market trends. Some swing traders prefer to focus on a specific industry and perform research such as monitoring news headlines or press releases for a particular business or industry. Establishing reliable information about recent activities could be the key to success in this preemptive approach to determining market trends. Effective traders may create their own tracking spreadsheets or utilize a complex algorithm to help them monitor market activities that could point to an upcoming trend.
Each approach to active trading is considered relatively high risk. This is because they involve interacting with company stock, and favorable results are contingent upon the market responding as the investor predicted. Scalping is arguably among the highest risk approaches to active trading. This strategy requires systematically buying and selling in reaction to slight changes or anticipated trends in the price of individual company stock. This form of trading requires close monitoring and frequent activity. Executing multiple trades in response to small gaps or changes in the price of a stock can become costly for investors. The cost per trade or spread should be factored into the potential gain before trades are placed.
About The Author
Jeff Bishop is a Professional Trader, Entrepreneur, and Founder of popular trading programs Raging Bull Trading and Weekly Money Multiplier. Jeff brings over 20 years of experience working as a trader, and has become known for his expertise in options trading and ETFs. He created Raging Bull Trading in 2010, alongside fellow trader Jason Bond, in order to provide a comprehensive education of trading in the stock market. Jeff Bishop created Weekly Money Multiplier in 2018, and is a trading program focused specifically on options trading.