Tuesday, April 17, 2018

Active Trading Strategies to Follow in 2018

Active trading isn’t for everyone. Honestly, it is not even investing. Investing involves more than a few minutes or hours of holding a stock. 

But this does not mean that active trading doesn’t involve some form of analysis, it is just that the analyzing period is very short. That being said, active trading is an art of buying and selling securities based on short-term price fluctuations. 

For instance, if you are interested in buying shares from Compass Group, a British multinational company, you can check compass share price live and analyze its stock chart from 1 minute ago to 1 week ago and actively participate in its trading.

To accomplish an active trading strategy there are various strategies used, each with its own market environments and risks. Below are some of those strategies:

Day Trading

This is perhaps one of the most well-known trading styles. As its name implies, day trading is the method of buying and selling securities in the same day and positions aren’t held overnight. 

Although traditionally day trading is done by professional traders, electronic trading has opened up this practice to noob traders as well. Though day trading may seem like gambling, trading is an investment in trends. 

Day traders observe trends, monitor movements and know when they should buy or sell a position. Although this isn’t an unusual method, their reaction to a movement occurs in minutes or hours rather than in days or months.

Trend Trading 

This is sometimes considered as being a buy-and-hold strategy and not active trading. However, when done by an advanced trader, it can be a form of active trading. This strategy uses longer term charts, from daily to monthly, along with other methods to determine the trend of the current market direction. 

Trend traders look for successive higher highs and lower lows to determine the trend. By riding this wave, they aim to benefit from both up and downside of the market.


Probably one of the quickest methods in the list, it includes using various price gaps caused by bid-ask spreads and order flows. This strategy works by buying at the bid price and selling at the ask price to receive the difference between the two price points. 

Additionally, they do not try to exploit large moves or trade high volumes; rather they take advantage of the small moves that occur frequently.

Swing Trading 

At the end of a trend, there is usually some price volatility as the new trend tries to establish itself. Swing trading involves buying or selling securities as the price volatility transpires. 

Although they are usually held for more than a day, they do not cross the trend traders’ timeline. Swing traders create a set of trading rules based on technical analysis. These rules are designed specifically to identify when to buy and sell a security. 

Although this software does not have to predict the exact peak or a price move, it does need a market that moves in one direction or the other.

The bottom line is that an active trader can employ any or all of the mentioned strategies. Nonetheless, before engaging in such strategies, the risk and costs associated with each needs to be explored and understood.

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