Advanced Strategies

Being active in trading means that you are buying and selling assets on short-term movements to make profits from the price movements on short run. The mentality related to an active trading strategy is different from the long-term, buy-and-hold strategy which is found among passive traders. Active traders think that short run movements and catching the market trend are the main moments where the profits are generated in the financial market.

There are several techniques used to achieve an active trading strategy, each with the suitable market surroundings and risks inherent in the strategy. Here we will show you the four most common active trading strategies and the built-in costs of choosing each of them.

Day trading is probably the most well-known active trading style. It’s a synonym for active trading itself. Day trading, as its name says, is the process of buying and selling assets within the same day. Positions are closed within the same day they are opened, and no position is held overnight. Based on tradition, day trading is done by professional traders, such as specialists or market movers.

Position trading is considered to be a buy-and-hold strategy and not daily one. Even though, position trading when done by experienced traders, can be considered a form of active trading. This strategy uses long term charts- from daily to monthly, combining them with other methods to define the trend of the current market movements. This kind of trading may last for several days to several weeks depending on the trend.

Swings trades typically get in the game when a trend breaks. At the end of a trend, there is usually some price volatility as the new trend tries to establish itself. The main goal of swing trading is to spot a trend and then capitalize on the swing lows as periods of buying, and the swing highs as periods of selling. Swing traders often search for markets with a high degree of volatility as these are the markets in which swings are most likely to happen.

A scalper does not try to trade with large moves or high volumes. They try to take the best out of the small moves that occur frequently and trade with smaller volumes more often. Since the amount of trading is small, scalpers look for more liquid markets to increase the frequency of their trades.