Investment Trading Strategies
Usually the term day trading is used to refer to buying and selling stocks on the same day. A day trader uses trading strategies to leverage large amounts of capital by taking advantage of small price movements in highly liquid stocks. One of these trading strategies is entry strategies. A day trader will usually look at the liquidity and the volatility of a stock to determine if it is ideal as a day stock. Liquidity here is the ability to enter and exit a stock while maintaining a good price on it. It thus needs to have tight spreads and low slippage. Volatility is the expected daily price range. If a stock proves to be more volatile it also means it has greater losses or profits. Therefore if you are looking for a day stock, ensure that the stock is cheap, has a large number of shares being traded daily and is very volatile. After this, identify possible entry points and go for it if it seems viable.
Gap trading strategies involve a disciplined approach to buying and shorting stock. A trader identifies a stock that has a price gap from the previous close and uses the rise and fall of this price to signal either a purchase or a short. This gap or change in price level from the previous day is the pattern used to either come up with a Common, Breakaway, Continuation or Exhaustion patterns and that affects the long-term understanding of stock activity.
In any investment plan, developing strong trading strategies is essential as a playbook is to a winning football team. Trading strategies set your investment direction, goals and risk boundaries. Any strategy that is taken needs to be thought out well and should not be an emotional decision. Flip-flopping between strategies should also be avoided as are decisions influenced by greed or fear. For example, one of the trading strategies called Swing Trading requires that the stock buyer have some patience since he or she may need to hold on to stocks for days waiting for the stocks to go up. Position Trading strategy requires even more patience than Swing Trading. Here, the investor may need to hold on to stocks for weeks or months until market trends show an up-trend. This strategy has a higher risk but at the same time the gains are much higher when they come. The bottom line, determine which of the trading strategies you want to use and stick in there. The rewards will speak for themselves.
