Active Trading Strategies and How to Use Them

Active trading refers to the act of buying and selling securities based on short term fluctuations to gains some profits from the price movements on a short-term stock chart.  The principle behind active strategies differs from the long term buy-and-hold strategies.

In this article, we’re going to tackle some of the most popular active trading strategies and how to use them to your advantage. If you’re aiming to become a successful active trader, you should seek assistance of Online Forex Trading-Financial Services.

Day Trading

Day trading is arguably the most popular active trading strategy. Most of the time, traders refer to it as the pseudonym of active trading itself.

By definition, day trading is the method of buying and selling securities within the same trading day. Positions are closed out within the same they that they were opened.  That means no position is held overnight.

Conventionally, day trading is undertaken by professional traders like specialist or market makers.  However, online or electronic trading has paved the road for this practice to become more readily available to retail and rookie traders. It could be easily done with Online Trading Platform Software.

Position Trading

In fact, some traders think that position trading is a buy-and-hold strategy.  However, when you’re doing position trading and you’re an advanced trader, you can do it as a form of active trading.

Position trading requires the use of longer term charts, which can be daily or monthly charts, in conjunction with other methods to track the trend of the current market direction. This type of trade can last for several weeks and sometimes even longer, depending on the trend being tracked.

Trend traders spot successive higher highs or lower highs to determine the trend of the security.  By jumping in and trying to ride the wave, trend traders try attempt to benefit from both the up and downside of market movements.

Trend traders try to determine the direction of the market, but they don’t try to predict any price levels.  Trend traders just jump on the trend after it has already established itself.  When the trend breaks, they jump off ship.

It goes without saying that this strategy is much more difficult to perform in times of extreme market volatility.

Swing Trading

Now, when a trend breaks, it’s where swing traders typically get in the game. At the end of a trend, there’s usually some price volatility as a new trend starts to establish itself.  Swing traders buy and sell securities as the price volatility starts to make waves. Swing traders typically hold their trades for more than a day but a shorter time than a trend trade. Swing traders, most of the time, create a set of trading rules that are based on technical or fundamental analysis.

These trading rules or algorithms are created to identify the time when to buy and sell a security. A swing trading algorithm does not need to be exact and predict the peak or the valley of a price move.  On the other hand, it does need a market that moves in one direction or another.

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