Types of Stock Trading



There are many different types of stock trading including long term buy and hold trading and scalping over small time frames. Let’s take a look at some of them in more detail.

Long term and hold investing

This is my investment style of choice. Long term buy and hold investing simply means you buy your stocks with the aim of holding onto them for the medium to long term. This is commonly a year to several years or even longer in some cases.

This type of trading offers the opportunity to earn returns over the longer term, with little need to focus on the short term volatility.  This strategy works well for the majority of investors who can simply capitalize on the markets tendency to rise in value over time.

The main advantage of this buy and hold strategy is the very low time requirements. There are more successful traders who invest in the long term than any other type of trading.

Scalping Stocks

Scalping stocks is where a trader aims to profit from very small price movements. Many scalping trades are open for as little as a few seconds.

Scalping is extremely labor intensive and often requires a trader to spend many hours a day trading, and requires constant monitoring of your securities in order to realize a profit.

As scalping stocks often means making a high number of trades, there is often the need for considerably large account size, otherwise the trading fees will be likely to eat into a high proportion of your returns.

To be successful scalping stocks you need to have a strict trading plan and stick to it. Considerable practice on a simulated stock trading account is highly recommend if you are new to scalping. It is essential to have your emotions firmly in check before scalping on a real money account.

Intra day Stock Trading

Intra day trading involves buying a stock but selling it during the same trading day. Intra day traders do not hold positions overnight.

Like Scalping, intra day trading requires strict discipline and a solid trading plan. This can be practiced on a simulated account. It is much better to make your mistakes with “dummy” money than on a real trading account.

Intra day stock trading is also very labor intensive and can be very stressful to many people, myself included. Intra day stock trading is sometimes referred to as “day trading”.

Swing Trading

Swing trading is in between day trading and long term buy and hold investing. Typically swing trades are held from a day to a few weeks.

Swing traders use technical analysis and/or fundamental analysis to make their trading decisions.

Swing trading isn’t anywhere near as labor intensive as day trading and scalping but it does require a little more time than long term investing.

Conclusion

In conclusion the style of trading that is right for you is often dependant on the amount of time and desire you have for trading. As many of us have busy lives, long term buy and hold investing is often most suitable.

Trading the smaller time frames can be very risky, but very profitable if you have time, discipline and patience to stick with it long enough.

As I mentioned earlier, always practice your strategy on a virtual account prior to funding an account with a real stock broker.




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