What Are The Different Types Of Stock Trading?

October 6, 2020 Off By TERRILYN

Trading is essentially the exchange of goods and services between two entities. It is the basic principle which forms the core of all economic societies and financial activities. Trade governs the wheels of progress in any society and it is allowing for wealth creation. A place where any form of trade takes shape is called a market. This is depending on the kind of products, the market is defined. For instance, a place where stocks trading is taking place that is called the stock market. there are different types of trading the following:

Day Trading

This form of trade involves purchasing and selling stocks in a single day. In the case of day trading, individuals hold stocks for a few minutes or hours. A trader involved in such trade needs to close his/her transactions before the day’s market closure. It is popular for capitalizing on small-scale fluctuations in the NAV of stocks. Day trading requires proficiency in market matters, a thorough understanding of market volatility, and a keen sense regarding the up and down in stocks trading values. Therefore, it is performed mostly by experienced investors or traders.

Scalping

It is also known as micro-trading. Scalping and day-trading are both subsets of intraday trading. Scalping involves reaping small profits repeatedly ranging from a dozen to a hundred profits in a single market day. The holding period of securities, in this case, is shorter compared to day-trading, i.e. individuals hold stocks spanning a maximum of a few minutes.

This feature allows for the frequency of transactions. Similar to day-trading, scalping requires market experience, proficiency, awareness of market fluctuations, and prompt transactions.

Swing Trading

This style of stock market trading is used to capitalize on short-term stock trends and patterns. Swing trading is used to earn gains from stock within a few days of purchasing it; ideally one to seven days. Traders have technically analyzed the stocks to gauge the movement patterns they are following for the proper execution of their investment objectives.

Momentum Trading

In the case of momentum trading, a trader exploits a stock’s momentum, i.e. a substantial value movement of stock, either upwards or downwards. A trader tries to capitalize on such momentum by identifying the stocks that are either breaking out or will break out. The trader sells the stocks he/she is holding, thus yielding higher than average returns. In case of downward movement, the trader purchases a considerable volume of stocks like NYSE: BAC at https://www.webull.com/quote/nyse-bac to sell when its price increases.