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Trading Methods In Stock Market

Trading Methods In Stock Market

Day Trading

1. Trading Methods In Stock Market (Day Trading) involves taking a position in the markets with a view of squaring that position before the end of that day.
2. A day trader typically trades several times a day looking for fractions of a point to a few points per trade, but who close out all their positions by day`s end.
3. The goal of a day trader is to capitalize on price movement within one trading day.
4. Unlike investors, a day trader may hold positions for only a few seconds or minutes, and never overnight
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Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock exchange is closed due to news that can affect the prices of your stocks.
Day trading can be further subdivided into a number of styles
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1. Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small per share profit on each transaction while minimizing the risk.

2. Momentum Traders: This style of day trading involves identifying and trading stocks that are in a moving patterns during the day, in an attempt to buy such stocks at bottoms and sell at tops.


Advantages of Day Trading

1. Zero Overnight Risk: Since positions are closed prior to the end of the trading day, news and events that affect the next trading day`s opening prices do not effect your portfolio.

2. Increased Leverage: Day Traders have a greater leverage on their trading capital because of low margin requirements as their trades that are closed in the same market day. This increased leverage can increase your profits if used wisely.

3. Profit in any market direction: Day trading often will utilize short-selling to take advantage of declining stock prices. The ability to lock in profits even as markets fall throughout the trading day is extremely useful during bear market conditions.

Swing Trading

Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.

1. Swing trading combines the best of two worlds the slower pace of investing and the increased potential gains of day trading.
2. Swing traders hold stocks for days or weeks playing the general upward or downward trends.
3. Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.
4. By rolling your money over rapidly through short term gains you can quickly build up your equity
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How does Swing Trading work?

1. The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
2. Strongly trending stocks often make a quick move after completing its correction which one can profit from.
3. One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
4. In brief a Swing Trader`s goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques
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What are the advantages of Swing Trading?

1. Swing Trading combines the best of two worlds the slower pace of investing and the increased potential gains of day trading.

2. Swing Trading works well for part-time traders especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn’t require that type of focus and dedication.

3. While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride “swings” in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.

4. With day trading, the only person getting rich is the broker. “Swing traders go for the meat of the move while a day trader just gets scraps.” Furthermore, to swing trade, you don’t need sophisticated computer hook-ups or lightning quick execution services and you don’t have to play extremely volatile stocks.

We believe that the Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.

To fully understand what swing trading really is, you first need to understand what up/down trends are
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Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last “swing” in the trend will serve as support for the next low. These areas are circled.

Down Trend: Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last “swing” in the stock’s trend will serve as resistance for the next high. These are circled.

Long Swing Trades: Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.

Short Swing Trades: Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched
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Trend Trading

A trend is nothing but the general direction of the price of an asset or market in general.

A trend can apply to equities, bonds, commodities and any other market which is characterized by a long-term movement in price or volum
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What is Trend Trading?

1. Trend trading is one of the most effective and easy to use methods for making money in the market. Trend trading success depends on identifying and catching the trend after it has started and getting out of the trend as soon as possible after the trend reverses.

2. Trend Trading involves taking a position in the markets with a view of holding that position for weeks to months for larger than normal gains. Trend traders or investors generally trade the long term or secular trends and are not concerned with the day to day market volatility
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Advantages of Trend Trading?

1. Trend trading is the fastest and most risk free way to make money in the markets. In trend trading you can identify a change of trend in the market as early as possible, take your position, ride the trend and close your position shortly after the trend reverses.

2. With Trend Trading it is very possible to catch 60 to 80% of many intermediate term and long term market movements and thus create wealth for yourself and your family.

3. Trend Trading will help you take large profits out of the market, without having to watch the market or stocks on a minute-by-minute or even a day-by-day basis.

4. Whether you are a short-term day trader or a long-term investor, we believe incorporating Trend Trading into your overall trading plan is a must. There are two types of trades: “Income producing” trades and “Wealth-building” trades. Swing trading and day trading produce income, while Trend Trading Picks is designed to amass wealth.
Mastering Risk and Reward in Trading

Not mastering risk and reward in trading is probably the main reason why so many traders and investors are destined to fail. It’s really dumb when you think about it, because reward/risk is the easiest way to get a definable edge on the market house
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The reward/risk equation builds a safety net around your open positions. It’s designed to tell you how much can be won, or lost, on each trade you take. The secondary purpose is to remove emotion so you can focus squarely on the cold, hard numbers.

Let’s look at 15 ways that reward/risk will improve your trading performance.

1. Every setup carries a directional probability that reflects a specific pattern. Always execute positions in the highest-odds direction. Exit your trades when a price fails to respond according to your expectations.

2. Every setup has a price level that violates the pattern. Only take trades where price needs to move a short distance to hit this “risk target.” Look the other way and find the “reward target” at the next support or resistance level. Trade positions with the highest reward target to risk target ratios.

3. Markets move in trend and countertrend waves. Many traders panic during countertrends and exit good positions out of fear. After every trend in your favor, decide how much you’re willing to give back when things turn against you.

4. What you don’t see will hurt you. Back up and look for past highs and lows your trade must pass through to get to the reward target. Each price level will present an obstacle that must be overcome.

5. Time impacts reward/risk as efficiently as price. Choose a holding period based on the distance from your entry to the reward target. Then use price and time for stop-loss management. Also use time to exit trades even when price stops haven’t been hit
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6. Forgo marginal positions and wait for the best opportunities. Prepare to experience long periods of boredom between frantic surges of concentration. Expect to stand aside, wait and watch when the markets have nothing to offer.

7. Good setups come in various shades of gray. Analyze conflicting information and jump in when enough ducks line up in a row. Often the best thing to do is calculate how much you’ll lose if you’re wrong, and then take the trade.

8. Careful stock selection controls risk better than any stop-loss system. Realize that standing aside requires as much deliberation as an entry or an exit, and must be considered on every setup.

9. Every trader has a different risk tolerance. Follow your natural tendencies rather than chasing the crowd. If you can’t sleep at night, you’re trading over your head and need to cut your risk.

10. Never enter a position without knowing the exit. Trading is never a buy-and-hold exercise. Define your exit price in advance, and then stick to it when the stock gets there.

11. Information doesn’t equal profit. Charts evolve slowly from one setup to the next. In between, they emit noise in which elements of risk and reward conflict with each other.

12. Don’t be fooled by beginner’s luck. Trading longevity requires strict self-discipline. It’s easy to make money for short periods of time. The markets will take back every penny until you develop a sound risk-management plan.

13. Enter positions at low risk and exit them at high risk. This often parallels to buying at support and selling at resistance, but it can also be used to trade momentum with safety and precision
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14. Look to exit in wild times in order to increase your reward. Wait for price acceleration and feed your position into the hungry hands of other traders just as the price pushes into a high-risk zone.

15. Manage risk on both sides of the trade. Focus on optimizing entry and exit points and specialize in single, direct price waves. Remember that the execution of low-risk entries into bad positions allows more flexibility than high-risk entries into good positions
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