TRADING STRATEGY

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Active trading is the act of buying and selling securities based on short-term movements to profit

from the price movements on a short-term stock chart. The mentality associated with an active

trading strategy differs from the long-term, buy-and-hold strategy.

Strategy trading

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The buy-and-hold

The buy-and-hold strategy employs a

mentality that suggests price movements

over the long term will outweigh the price

movements in the short term.

 

Active traders

Active traders, on the other hand, believe that

short-term movements and capturing the

market trend are where the profits are made.

4 common trading strategies

There are various methods used to accomplish an active trading strategy, each with appropriate market

environments and risks inherent in the strategy. Here are four of the most common active trading strategies

and the built-in costs of each strategy.

Day Trading

 

Day trading can be the

most popular trading

style. It's often

considered a

pseudonym for active

trading itself. Day

trading is the method of

buying and selling

securities within the

same day. Positions are

closed out within the

same day they are

taken, and no position is

held overnight.

Traditionally, day trading

is done by professional

traders, such as

specialists or market

makers. However,

electronic trading has

opened up this practice

to novice traders.

Position Trading

 

Some actually consider

position trading to be a

buy-and-hold strategy

and not active trading.

However, position

trading, when done by

an advanced trader, can

be a form of active

trading. Position trading

uses longer-term charts

–in combination with

other methods to

determine the trend of

the current market

direction. This strategy

of trade may last for

several days to several

weeks and sometimes

longer, depending on

the trend.

Swing Trading

 

When a trend breaks,

swing traders typically

get in the game. When

the trend is over, there

is usually some price

volatility as the new

trend tries to establish

itself. Swing traders buy

or sell as that price

volatility sets in. Swing

trades are usually held

for more than a day but

for a shorter time than

trend trades. Swing

traders often create a

set of trading rules

based on technical or

fundamental analysis.

These trading rules or

algorithms are designed

to identify when to buy

and sell .

Scalping

 

Scalping is one of the

quickest strategies

employed by active

traders. It includes using

various price gaps

caused by bid-ask

spreads and order

flows. The strategy

generally works by

making the spread or

buying at the BID price

and selling at the ASK

price to receive the

difference between the

two price points.

Scalpers attempt to

hold their positions for

a short period, thus

decreasing the risk

associated with the

strategy.

Past performance is not necessarily indicative of future results. All investments carry risk and all investment decisions of an

individual remain the responsibility of that individual. There is no guarantee that systems, indicators, or signals will result in

profits or that they will not result in losses. All investors are advised to fully understand all risks associated with any kind of

investing they choose to do. Hypothetical or simulated performance is not indicative of future results.

 

RISK WARNING - TRADE RESPONSIBLY: Derivatives are leveraged products that incur a high level of risk and can result in the loss of all your capital and may therefore not be suitable for all investors. You should not risk more than you are prepared to lose and before deciding to trade, please ensure you understand the risks involved, take the level of your experience into consideration and seek independent advice if necessary. We strictly do not provide trading advice. To read our full risk disclosure statement, please click here

 

 

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