Stock trading can be a great way to make just a little bit of extra cash or if successful – a lot of money! One of the key ways of being successful as a stock trader is having a good technique.
Scalping Stock Trading Technique
One of the most popular stock trading techniques is scalping. This stock trading technique is a great choice for beginners, and involves selling your stocks almost as soon as it has begun to make profit.
Essentially you make lots of small profits, but minimize losses. The method behind is it that traders believe that by placing lots of small trades it is easier to catch small moves in the stock prices than large ones.
Often a stock trader will establish and liquidate their position very quickly – sometimes within seconds or minutes. It is a very rapid and fast-moving method that keeps you on your toes. You have to be able to keep a firm eye on the stock market to know when to buy out.
Momentum Stock Trading Technique
Another one of the most popular stock trading techniques is the momentum technique. Momentum refers to the technique of following the crowds. You buy and sell stocks based on news releases and the general consensus among the trading community.
This is one of the simplest popular stock trading techniques and requires minimal technical knowledge – just the ability to stay abreast of current affairs and stay well connected with what’s going on in the trading world. Having an in depth knowledge of the market you are buying into will also put you in good stead.
Trend Following and Contrarian Stock Trading Techniques
Trend following is a very popular stock trading technique. It is a technique that is used in both day trading and other lengths as well. Trend following is pretty much as the name suggests. Traders follow trends – for example, if the price of a stock is rising they make the assumption that it will continue to rise and vice versa.
Using the trend following technique, the stock trader buys stocks as they begin to rise and sells as they begin to fall in the assumption they will continue in this trend.
Contrarian works in an opposite manner to trend following in that it assumes that if stock prices are rising then they will reverse and begin to fall and vice versa. Using the contrarian stock trading technique the trader will buy stocks as they begin to fall and sell them as they are rising.
Artificial Intelligence Stock Trading Technique
In recent years stock trading techniques have advanced so much that you no longer need to understand all the technical details yourself! More and more advanced programs and software are being created to help take the hard work out of stock trading.
Artificial intelligence stock trading software can be very expensive – costing into the tens of thousands of dollars for the best software. These are obviously reserved for the more serious stock traders. There are however much more affordable options and they have inbuilt intelligence that helps you determine when to buy and sell your stock.
One of the techniques used by software programs include the ability to track words and phrases within news articles to establish whether this is a negative or positive influence on your stocks.
Price Action Stock Trading Technique
The final most popular stock trading technique we shall look at today is the price action stock trading technique. This is one of the simplest of techniques, however it is very technical and detailed so requires in depth knowledge of how the markets work.
Traders using the price action technique do not use conventional indicators such as those we’ve mentioned before, but instead use technical analysis. This can include evaluating chart patterns, volumes and other raw market data to make an educated prediction as to which way the market will go.