The introduction of online stock trading has done away with the need of a trading ring. The stock trader today can trade from the comfort of his home. The dissemination of news, the matching of demand and supply and the actual trade takes place at a very swift pace. Sophisticated software has made technical analysis seem like child’s play, and weaknesses and strengths in stock prices are very easy to detect. All this has opened up a plethora of opportunities to the trader and he can now easily execute different kinds of online stock trading strategies.
Kinds of online stock trading strategies:
Scalping is a kind of intra-day trading. A scalper buys and sells stocks for small margins several times during the course of a trading session. The volume and frequency of trade help him to make decent profits. However, it is time consuming as the trader has to watch the market movement the entire day. Also, frequent trades will mean that the brokerage amount will be huge. An advantage is that a scalper cuts his position before the end of the day’s trade and will not have to worry about overnight positions.
Before the advent of online trading, traders had to manually draw charts and graphs to identify stock trends or depend upon the broker for technical trends. Now along with the online terminal, brokers provide the facility to view charts and graphs which makes technical trading easier. Technical trends may be determined by various methods such as Moving Averages, Fibonacci, Stochastics, RSI, Candlesticks. Technical traders may be intraday traders or positional traders. Technical analysis does not always prove to be right and traders should trade with their stop losses in place.
Momentum traders identify stocks which are moving either upward or downward on huge volumes. Somewhere along the way they get in taking either long or short positions depending on the trend, ride the momentum, make their profit and exit before the trend halts or reverses.
When a trader adopts fundamental online stock trading strategies, fundamental aspects of the stock form the basis of trade. This may be declaration of earnings or introduction of new products. A fundamental trader will take positions in the stock based on inside information or on actual news announcements and profit from the movement thereafter. In case of company acquisitions, mergers, demergers or in the event of a stock split, the fundamental trader will take positions in the stock after careful calculations of ratios and prices.
Swing traders are not day traders. They hold on to their positions for few days. They trade in the direction of the trend. They profit by riding short term moves in stocks. Trends are identified by means of technical analysis. A lot of preparation goes into swing trading. Stocks have to be identified, resistance and support levels have to be found out, entry and exit levels decided upon and at the same time the trader has to keep an eye on major events affecting the market or the stock.
Stock trading may seem to be very easy but it requires preparation as well as discipline. Greed and fear are the two aspects which are said to govern success and failure in stock investing. This applies to execution of online stock trading strategies too. Greed will result in not exiting trades at the right time in the hope of greater profit. Fear will result in not taking the trade to its logical end which will lead to reduction in profit.