Common Active Trading Strategies

Active traders think differently when it comes to the stock market. They are more aggressive in their actions, thinking that short-term movements and capturing the market trend make profits. There are four common strategies active traders use.

Scalping

 


 

 


Scalping is the ultimate short-term trading form. Scalp traders keep positions open for mere seconds and never longer than a few minutes. Scalp traders target minor intraday price movements in an attempt to make lots of quick trades with smaller profit gains. Meanwhile, profits build throughout the day due to the mass of trades executed in every session.

Scalpers focus their trading during the most active parts of a trading day. This occurs during the congruence of trading sessions because at this time this is a surge in the volume of trades being made. Scalpers aim for incredibly tight spreads. Since they enter the market so often, a wider spread would diminish their returns. 

Day Trading

For those looking to avoid the stress of scalp trading may enjoy day trading. Day traders buy and sell on the same day, eliminating overnight risks. They close the day knowing if they’ve profited or had a loss. Trades are typically held for minutes or hours. This requires traders to budget time for market analysis and to frequently monitor positions. They must do this as day traders achieve a profit only through amassing small gains. Day traders must focus on fundamental and technical analysis. They achieve this through the use of technical indicators. These tools allow them to spot trends and identify market conditions.

Swing Trading

Day traders, as we know, hold positions only for a day, but swing traders are different. They typically hold positions for many days, sometimes even as long as a few weeks. Positions are held over a longer period to capture short-term market moves. This eliminates the need to stare at the charts and their trades all day.

Swing trading is a popular trading style for individuals who have outside commitments like a job or family but enjoy trading during their downtime. A few hours a day are still required to perform a full analysis of the market though. But swing traders and day traders aren’t so different. Both utilize trend trading, counter-trend trading, and breakout trading as trading techniques.

Position Trading

Position traders are primarily concerned with long-term price movement and search for maximum potential profits to be made from major price shifts. Trades tend to span from a period of weeks to months, sometimes even years. Position traders typically use weekly and monthly price charts for analysis and market evaluation. A duo of technical indicators and fundamental analysis are used to pinpoint potential entry and exit levels by these traders


These four types of active trading, scalping, day trading, swing trading and position trading, offer unique strategies for investors. Trading can be done at different timeframes and varying trade periods, proving that anyone can become an active investor.