Styles and methods of trading
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    Super Moderator Gulfstream's Avatar
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    Styles and methods of trading

    Trading style is unique for every trader. Style of trading on the stock exchange depends on the initial experience of money management and the value of money in his life.

    There is a variety of trading styles, but that does not mean that traders are unable to go against their natural preference, and does not imply that the choice cannot be changed.

    There are many ways to describe the style of trading. Some people define it by the markets in which they trade, or by currencies and commodities that they trade. Others use fundamental or technical division, some people characterize it by the type of trade such as spreads or options.

    Here are the different styles and methods of trading:
    • Scalping method
    • Momentum trading
    • Technical method
    • Intermarket spread trade
    • Arbitration trading

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    Super Moderator Gulfstream's Avatar
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    Scalping method

    The scalping method means buying and selling a trading tool many times during the day with a small surplus, which in general is a huge profit. This method is not based on windfall profits, while at the same time the possibility of loss is much less, so it's a fairly safe method.

    Traders increase profits on small movements at scalping and trade, analyzing one - five minute intraday charts, with a few minutes duration of positions, and very small profit per one transaction. Open positions are never carried over to another day.


    Momentum trading

    The basic idea of momentum trading consists in the following thing: the rising market tool will continue to rise, and the falling one will continue to fall. Momentum trading requires some of the most common analytical skills.

    The basic principle is that you do not buy the stock at the minimum and sell at the maximum. If you do not buy it until you see that it starts rising, then it means that you have missed the opportunity to buy it at the very bottom. Similarly, if you do not sell the tool until you see that it is falling, then you’ve missed your chance to sell it at the very top.

    The main technical indicators are dynamic ones which accumulate net change in prices of a tool closure within series of certain periods of time. Control line is constructed as a tandem line to a price chart and shows the zero axis. Positive values show the supported upward movement, while negative values indicate a potentially supported downward movement. Upward or downward trend of indicator shows the "strong move" of the tool.

    When the trader is sure that he has identified a strong movement of the stock, he is making the deal. Skipping the first one or two ticks of movement does not matter, because he is ready to make a purchase (or sale) in one of the following periods of the impulse.

    The momentum trading is also fraught with dangers that could easily destroy even the well-disciplined and well-informed trader. With proper understanding of the technology, sufficient knowledge of the risks and willing to accept accidental loss, momentum trading can be attractive for aggressive traders who like to balance on the edge.

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    Super Moderator Gulfstream's Avatar
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    Technical method

    The technical method applies to all market tools and is intended to obtain a quick profit. Technical traders evaluate the history of the company (in the case of shares), analyze charts and price movements, evaluate trading patterns in the past and on this basis predict what might happen in the future and they may even trade with volume during the period.

    Technical method involves examining price movements and trading volumes to determine the model type such as “head and shoulders”, and other patterns. Other indicators include the support and resistance levels, moving averages, etc.

    The main disadvantages of this trading method are:
    -Too great dependence on the past behavior of the stock.
    -A great number of technical indicators. There is no perfect indicator for each stock.


    Intermarket spread trading

    The trading on intermarket spread consists of a long position in one market tool and a short position in the other tool that are closely connected. The logic of an intermarket spread is that the purchase and sale of two different tools effectively use the correlation between them. Intermarket spread trading is considered to be very hard to implement for it requires transactions on different exchanges. It is mostly used for commodity futures contracts.

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    Super Moderator Gulfstream's Avatar
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    Arbitration trading

    Also known as a "riskless profit", the trading system through arbitration is a simultaneous purchase and sale of the market tool to make a profit from the differential in price. This trading system is typically used on different exchanges or trading platforms. An investor can earn on the price difference of a stock at two different exchanges due to exchange rate fluctuations.

    For example, a trader buys a share in foreign exchange, which is not adapted to the constantly changing exchange rate. He buys the undervalued stock and sells the overvalued one, thus profiting from the difference.

    Another way to trade in the arbitration is that an investor wants to sell a stock at a certain price. He sets an order to sell at this price and at the same time sets an order to buy at a higher price. As a result, other investors can buy a stock at the first price, tempted by the higher price offered in the second order. Once the first sell order is executed, the investor cancels his second buy order. Thus, he is not only gets rid of his illiquid asset, but also makes good money on this.

    The arbitration trading is usually used by large institutional investors with multimillion assets. It is the most effective in liquid markets.


    DAY-TRADING-STRATEGY.COM

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    Last edited by Gulfstream; 01-30-2013 at 03:11 PM.

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    Gulfstream, i prefer short term trading which you can say scalping as well. And for that, i do technical analysis on 15 minutes charts as well as hourly charts and usually trade on majors currency pairs because there spreads are comparitively low . But the thing in which i am lacking is in fundamental analysis :( This is my weakness :(

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    Rookie mohamed reda's Avatar
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    we can say that scalping is the fast way to make pips in short time and also it is not risky for any beginner trader so i think that is the best method to make profits for any trader also it may be the most popular way to make profits in my opinion .

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    thank you for your information, I'm new for trading. I will study about my style trading..

    thanks..

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    Scalpers do not get much and this method is exhaustive. According to my experience, the earning objective through scalping is not satisfactory, we must venture for bigger profits. Time is also one form of money as it is said"Time is money". A sound strategy can produce hundred of petty benefits.

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    we are able to claim in which scalping will be the quickly way to make pips in other words period plus it's not necessarily risky for almost any rookie broker i really feel this is the most practical way to create income for almost any broker likewise it could be the most popular way to make income i think.

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    I prefer to rely on a quick way in trading namely scalping , but the goal 20 points in some trades and also do I trade on the news and be aimed at the most only 50 points in all the news, especially the important news in the market
    Technical analysis do I based it a bit and I open up deals continue for a great time and the goal is 100 points

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