When it comes to stock trading, there are a whole host of different methods out there for investors to choose. The long-term approach, for example, can reap rewards for those who have the patience and the capital. Day trading, meanwhile, allows for traders to use a range of methods to hopefully make profits within the price movements of the day. Very short-term trading methods, such as scalping, can allow profits to be made in a short space of time by committed and focused investors. While this article can only scratch the surface of the choices available, it’s wise to use it to your advantage if you’re a newbie stock trader on the hunt for a method that suits both your lifestyle and your needs.
When it comes to stock trading, there’s never any guarantee that profits will be made. However, long-term trading allows you to hedge your bets by getting time on your side. Those who trade for short periods of time don’t give their positions the chance to recover from any stock market dips – however, those who trade for longer periods do have this advantage on their side. If it’s possible to tie up your investments for a long time, then there may be a statistically higher likelihood of good returns.
Day trading, as the name suggests, tends to involve opening and closing positions on the same day. There are plenty of specific types of day trading methods on offer, including the scalping method discussed below. Others, such as fading, rely on looking for sudden upward price moves that indicate that mass instrument sales may be about to follow.
The idea behind scalping is simple. While the long-term direction of an instrument can never be truly predicted, it can be assumed with some certainty that most will go in the predicted direction at least once. By closing positions at this point, tiny profits can be made – and if repeated over and over, these tiny profits can become larger ones.
Scalping does come with its risks, though. Largely a product of the shift towards online trading, scalping relies on fast trading times and efficient markets – and even short delays of a minute or two can cause your scalping strategy to break down. If you do choose to go down the scalping route, it’s wise to make sure that you compare brokers thoroughly first and read all of the small print before committing. Some brokers do not permit scalping, and may even block your account if they find you scalping when it’s against the rules.
Stocks have always been a trading instrument of choice for many investors, and it’s easy to see why. Not least among the list of advantages is the range of methods on offer: from by-the-minute scalping to long-term investing, there’s a way to suit pretty much every stock trader no matter how much capital, time or knowledge they may have under their belts.