This type of trading denotes the buying and selling of securities due to short-term price movements that happen in the market. therefore the concept related to the active trading is much different when compared to the normal trading policies followed by investors.
The usual buy and hold strategy is the one where there are buy and sell activities based on long-term price changes and the demand and supply created due to these changes. But active traders believe in making the most out of the short term trade changes and find profits from this time. Based on different markets and situations, there are 4 major classifications of this active trading strategies. Find more info by reading this write up to get a better understanding of active trading.
Active trading can be classified as:
- Day trading: the most well-known trading style in this category. As its name, this means buying and selling of securities on the same day. No shares are held for the next day they are bought and sold on the same day and profits are also made from these. This type of trading is opted by market leaders who are professional in trading because they are the ones who know the market well enough.
- Position Trading: this can be actually a buy and hold But when well-experienced traders undertake this it is seen as an active trading method. In this charts are used, that are either monthly or daily based ones which show how the price of the stock moves. These are based on trends of the share prices and hence also known as trend trading. Thus this can also go up to many days before they are settled off.
- Swing Trading: swing traders are the ones who make optimum use of the time when one trade finishes and a new trade begins. This short time can guarantee some good profits.these are also for more than a day trading, it can last longer but not as long as position trading. These traders create a basic set of trading rules based on fundamental analysis.
- Scalping: this is one of the quickest methods adopted by active traders. It makes the time between the ask and bid price times to make profits. Scalpers usually hold their positions for a short time as they tend to decrease the risks associated with this type of trading.
Hence these trading methods make active trading clear as a concept to the new users.