FAVORITE TACTICS OF ACTIVE TRADERS
Active trading, by simple definition, is the process of selling and purchasing securities based on short-term market movements to profit from the price shifts. Contrary to a long term strategy which implied a buy-and-hold procedure, this one sees the most earnings during brief changes that capture a certain trend. There are various ways for this, each with their own advantages and risks. Below are the 4 common methods used with their costs:
Day This is a famous method, and sometimes also refers to as an alias of active style. As the name suggests, it involves transactions completed only within the day, wherein positions are closed and nothing is held up until tomorrow. Previous, this is done by experts only, but with the rise of electronic exchange,
Position Often considered as a method for longer periods, this type uses term uses either monthly or daily term charts, plus combines other tactics to know where the market is headed. This may take weeks depending on the trend, and traders here aim to search for either higher or lower highs, to benefit from any kind of movement. Most of the time, they ride on an established trend, and exits the post after it breaks. This is why during high volatility levels, positions are trimmed down given a complicated trading period.
Swing Traders using this type enters the picture when a position breaks as they use the volatility left for the trend to re-establish to buy and sell price. They are often held for more than a single day and follow rules based on fundamental or technical analysis, wherein the algorithms are wired to notify when to purchase or put a security for sale.
Scalping It is one of the fastest ways employed by active traders. Generally, its process involves price gaps, as participants buy at the bid price and sell at the ask price to get the difference between the two costs. Scalpers usually prefer to hold their post for a brief period as it lessens the risk, and does not try for large moves, as they find smaller ones more advantageous that are more frequent although they have to find more liquid markets to to heighten regularity.
Built-in costs for strategies As earlier mentioned, these techniques were once utilized only by professionals. This is because aside from a good execution, these ways require momentous hardware and software buyouts for successful application, in addition to real-time market information.
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