Different Kinds of Stock Day Trading
When you invest in stocks, you have a lot of strategies at your disposal. Usually, they depend on what kind of trader you are. You will then have to consider your personality, life style, the risk you can take, and your overall circumstances.
Luckily, these strategies aren’t too complex to understand for a beginner.
One of these strategies is day trading, which can also be subdivided into various day trading styles. Here are some of the most common stock day trading strategies that you can try out. One of them might just be the best style that will give you more profits than others.
An arbitrage is one kind of a hedged instrument. It is made to catch the slightest differences in prices. What you do is find an instrument that has two different prices in two different markets or platforms. Afterward, you buy at the one with the lower price, and then simultaneously sells at the higher price.
People assigned to make the market are appointed by the stock exchanges, such as the New York Stock Exchange (NYSE), Nasdaq Stock Exchange, American Stock Exchange (AMEX), and London Stock Exchange (LSE). Their task is to constantly provide ask and bid rates for the brokers, who will buy and sell the stocks in the aforementioned exchanges.
Momentum Day Trading
When you conduct momentum day forex trading, you make trades when the stocks apparently continues a trending movement. Afterwards, you close the trade at the end of the day.
Pattern Day Trading
Many stocks are volatile in nature, meaning they typically have more upward and downward movement in the course of a period.
As the stock continues such movements, it forms recognizable patterns and recurring movements. You can then use figurative diagrams, called chart patterns, to spot and analyze these movements. If you can do this correctly, you can make more consistent and profitable trades.
This kind of day trading is a technique that focuses on acquiring small amounts of profits from hundreds of trades, all entered into at the same time. You have to be quick in taking small profits, and you have to take advantage of ask and bid differences.
In this technique, instead of you paying the commissioner for buying and selling stocks, you can get paid by the services provider. You can try out ECN rebates, which will inevitably become your primary source of profit.
Price Action Trading
Price action is a simplistic and minimalistic approach to stock trading, considering only the action or movement of the stock’s price. You have to spot an entry point, the high and low of the price, and the closing of the time period, which can be for five minutes, thirty minutes, or sixty minutes. You then close the trade at the end of the day in your forex trading account type.
This type of day trading technique involves taking advantage of swings in the price movement of the stock. You enter at the perceived beginning of the swing, and then you close the trade at the end of the swing all in the same day of the trade.