Trading vs. investing is a widespread dilemma for those getting into the stock market. Investing requires more patience, whereas trading requires extreme discipline and precision.
If you are a trader, you are in it for the short term profits. Traders are often told to find their own strategy and not just mimic another trader’s strategy.
There are several strategies out there for you to try your hands on. Here are 6 of the simplest ones you could consider. All you have to do is open your free trading account and give these effective strategies ago.
Strike Success With 6 Simple Trading Strategies
1. News Trading
No one is alien to the speed at which news travels in this day and age. So if you want to adopt this strategy, you need to be as quick as a fox.
For a retail investor, of course, access to information is limited as opposed to an institutional investor. Nevertheless, it doesn’t mean the retail investor can’t make a profit at all.
As you must be aware, the news could either positively or negatively affect the price of a stock.
A large investment from a marquee investor, off-the-chart recent quarterly revenues, or the launch of a new product is all news stories that would positively affect a stock. And you know what to do here – go long!
If you hear of a show-cause notice being issued to the firm, the firm not meeting the targets of the quarter, or the crown jewel equivalent to a key employee putting his papers down, going short would be the way to go.
Having said all this, never make a hasty trade right after hearing the news. You never know if the news has already been factored into the price, i.e., other investors have already reacted to the news and bought/sold the stock.
2. Day Trading
Watching a day trader is fascinating – they are at it as soon as the Opening Bell rings.
Between the Opening and Closing Bell, they would be completely glued to the monitors, meticulously observing the candlestick with each passing second.
Day traders, as the name would imply, do not leave any positions open overnight.
In layman’s terms, what they need to buy or sell happens during that particular day. At the end of the day, the trader would have either made a gain or a loss.
Day trading takes advantage of the daily fluctuations in price. Buying at the worst point of time in the day and selling at the peak of the day is the way to go about it.
Easier said than done, of course! Day trading requires a lot of discipline, research, and intuition.
3. Scalping Trading
“Scalping” refers to the act of scraping off profits from short term trades through the smallest price movements.
Scalpers do not make huge profits and exit the market before the market has any chance of moving considerably. They do not eye large profits but instead focus on the total number of small winning trades.
This strategy needs extreme discipline to stick to your plan and not get swayed away by greed. Traders need to constantly be on their toes and watch the market as delicately as possible.
Scalpers often get many opportunities to enter the market but exiting the market at the right time is what the whole game is about. And yes, we know that timing the market is close to impossible.
4. Trend Trading
A trend can be observed by studying the historical price data of stock.
Trend analysis is part of technical analysis where the trader does not pay much attention to what the company is or does but only has a quest for a trend that can give him/her an entry into a market.
A trend trader is usually said to “ride the trend” and benefit from it.
For example, a “double top” pattern is when a stock’s price hits the ceiling two consecutive times, which is a significant fall in between these times. This trend means that the next direction of the price is downwards.
Uptrends would signal a long position, whilst downtrends signal a “Get out of there ASAP!”
5. Swing Trading
Picture a swing. What does it do? It oscillates to and fro. Now apply that to stock.
Swing trading refers to buying the stock at its trough just as it is about to swing up and then shorting it at its peak, right before it is about to oscillate back.
Let us go back to the actual swing. How do you know when the swing is about to fall from its peak. You need to assess the speed and the height of the actual swing for that.
Similarly, the duration, along with the length of each swing of the stock price, must be evaluated to use this strategy efficiently.
This requires extreme research, precision, and, again, intuition backed with historical trends.
6. End-Of-Day Trading
End-of-day traders mostly need to study the charts at the opening and the closing hours.
As the strategy’s name gives it away, these traders become active when the market is about to close. This is when there is some vision on the closing price, and accordingly, the traders take on their bets.
Traders anticipate how the price of the stock will move based on factors such as what has happened during the day, the previous few closing sessions, or any foresight into the next day.
It is recommended that traders abide by their stop-loss and limit orders to avoid risk.
For the traders just starting up, these simple strategies are what you should focus on in the beginning to get a hand of it. These are proven strategies, yes.
But, as we all know, they do not guarantee profits. You would need to do your own research, build your own hypothesis, and take a bet based on that.
If you’re an experienced trader, a stock trading api can help you automatically connect your screening software with the brokerage accounts to place orders.