The main idea of trading stock is to get a profit. And the best way to do it is to buy a stock that keeps moving all the time. And that is the basic of stock trading strategies that every trader needs to fully understand.
There are two types of timeframes, day trading that used by those who love to be a day trader or short time trader, and swing trading for those who want to be in long term trading.
The timeframe itself will outline the strategy they are going to use.
Stock Trading Strategies – Day Trading Strategy
The main idea of these stock trading strategies is to have a large position. Because the trader has a short time frame where they must take the smartest. And in most cases small move, in order to get the profit.
The combination of a large size position and a short time frame makes the trader must be able to put the brake in the right place and at the right time.
There are a couple of things that every trader can do when they chose to run this strategy:
- Get out of the market whenever the stock hits low or high during the day. It needs to be done to avoid the stock movement that goes in the wrong direction. Where the trader will end up losing more than they are willing to risk.
After all, it is always possible to reenter the market once that movement shows up a good sign.
- Decide the amount of money that the trader is willing to risk. And place a profit objective that 2 to 5 times bigger than that.
- Recognize the momentum and when the momentum starts to fade, get out and take the profit
Stock Trading Strategies – Swing Trading Strategy
These stock trading strategies work best for those who have a longer time frame. The key in this strategy is patience because the trader is looking for the profit target that is farther away.
The trader must be patient enough in order to get the profit they want. They can use technical analysis before making a decision.
Since it involved a longer time frame, the position size that the trader has is usually smaller than day trader, due to the fact that they want to take a larger move.
Those who run this strategy can make great success by doing these things:
- Determine the size of profit to get. Many traders choose to get out when they get at least 5% profit
- Monitoring the health of the market and the position is a must. If something isn’t right, a trader should preserve the capital by go cash entirely or lighten up
- There are times when traders should opt for sells or partial buys. Such as when the market is sluggish or when a breakout happens and there is a little follow up through.
- Do not let winning trades turn into losing trades by giving back more than half of the open profit when the profit already reaches 10%.
Before traders get down to the specific strategies they can use, they need to decide the timeframe first.
This time frame will help every trader to determine the sizing position. And also the best time where they can exit the trader.