3 Common strategies for stock trading

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Stock trading is becoming more and more common among individuals. Whether you want a full-time income or you just want to bolster your cash flow, there are a lot of benefits to well-planned stock trading. Like anything involving money, if you don’t approach trading with a good plan in place or it could all end in failure. Here are some common trading strategies which you may want to use.

First of all, day trading. This is probably the most widely-known method of active trading. You can probably guess something about this kind of trading simply from the name. Day trading involves buying and selling stocks within the same day. Except in special circumstances, the stocks are sold within the same 24-hour period, and no set position is held overnight. If you already know something about the day trading niche, then the whole idea may seem a little daunting. This would be understandable a decade or so ago, when most day trading was done by specialists and professional traders. These days, however, digital trading has made it much more accessible. Investopedia did a great article on novice day trading strategies.

Next, taking advantage of splits. Stock splits are where a share is split into two separate shares, with half the value of the original. The ratio isn’t always 2:1, but most splits are. Splits are often something of a double-edged sword. Depending on the stock in question, valuations can soar. If you’re a relatively small investor, these stocks may be completely out of reach. Even if you can afford these stocks, it might not be practical if you’re trying to maintain a diverse portfolio. Despite these complications, you should pay attention to splits, and know how to react to them. Reverse splits are usually done when a stock’s price gets so low that it’s starting to look worthless. Here’s some info on an apple stock split which should make things a little clearer. Generally speaking, a split is usually a reason to buy and a reverse split is a reason to sell.

Finally, there’s swing trading. Swing traders are usually most active when a trend breaks. As a new trend begins to establish itself, prices are liable to fluctuate greatly. As this kind of volatility settles down, swing traders will buy or sell. Swing trades are typically held for more than a day, but a shorter period than most trend trades. When executed properly, swing trading will put you a few steps ahead of your average day trader or trend trader. For a complete beginner, I recommend trying a different trading strategy to begin with. Successful swing traders usually have to form a specific set of rules, based on a lot of in-depth technical analysis. Because of this, it’s a much better idea to gain some experience of stock trading before trying your hand at swing trading.

Whatever strategy you choose, always approach the stock market with caution. Trading can be a massive financial benefit to you, but only if you apply a lot of analysis and care.

 

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