The Best Stock Trading Strategies of 2020

by Andrew R. Researcher

Successful stock investors could easily outperform a strong year in the stock market making huge profits from top stocks in the market, however; even the best investors perform an annual analysis to try to figure out ways different ways they could improve and make more profits. Stock traders use several technical strategies to buy and sell stock.

To get the right results, you must first choose the right stock to trade on and the type of stock you choose will depend on several issues, including your level of experience, capital, and the style of trading you are going to employ. In this article, we will discuss four common active trading strategies to help you make decisions while trading.

What is active trading?

Active trading is an act of buying and selling securities based on short-term movements to profit from the price movement on a short-term stock chart – source thetradeable.com. Usually, the mentality associated with an active trading system is different from the long-term strategies found in passive or indexed investors.

What are the four common strategies to use?

While most beginning investors think of the stock market as a fast-paced way to make profits it is however very difficult as you have to be right twice – once when you buy the stock and again when you sell it. Below are the four common active trading strategies:

Day trading

Day trading is one of the commonly known active trading style and is typically considered a pseudonym for active trading itself. Day trading is a method of buying and selling securities within the same day. All active positions are closed out within the same day they are taken and no position is held overnight

Swing trading

In swing trading also commonly referred to as momentum trading, trading account positions characteristically last two to six days but could last as long as two weeks. The general objective of swing trading is to capture larger gains within it. Swing trading is usually more susceptible to market volatility, as the risk of making huge losses beyond the initial investment is higher.

Position trading

Position trading is one of the best ways traders can take up long-term positions of stocks and other assets, on the contrary, an increase in inherent risk is imminent as occupying a position for a long period exposes you to these the volatile market risks. Before venturing into position trading, you should first do fundamental and technical analyses to make your evaluation of the market trends and the risks before opening a position.

Scalping

Scalping is an active trading strategy designed to profit from small price changes. It is one of the commonly used strategies used by active traders. The strategy works by simply buying and selling as soon as a profit is realized. Scalping involves holding the position for the shortest period possible thereby decreasing the risk associated with the strategy.

These four strategies are only to help you make a right and informed decision before deciding on which method to use. Trading is an activity that rewards patience and discipline. The strategies here may not be suitable for everyone and you should analyze the best strategy before making any investment decisions.