Active trading is a short-term process of earning profit. Different formulas are used to attain an active trading strategy. The strategies in active trading are different than that of a long-term strategy.
Let’s have a look at some strategies that will help you to be successful in active trading.
Day trading is the most popular style in active trading. In day trading, traders complete their buying and selling within the same day. Normally, professional traders invest in day trading as it needs professional skill and knowledge to understand the market. But nowadays, novice traders are also getting the opportunity to participate in day trading through electronic trading facilities.
Many people disagree position trading to be enlisted in active trading as it uses long-term charts. But when an active trader does position trading it can be turned to be active trading. This type of trade depends on the trend. If the trend lasts for a long time, then this trade also lasts for a long. Trend traders usually give more emphasis on market movement than price levels. They try to earn from both the up and downside of market movements. Trend traders focus on the trend and gain profit from there. Their position doesn’t last for long as it is broken when the trend end.
Swing trader gets their position after breaking of a trend. When a trend end, there is some price volatility and swing traders buy or sell at that time. Swing traders stay for a shorter period than a trend traders. Their time duration does not last longer than a day. There are some rules made by swing traders but from these rules or algorithms, it is difficult to decide when to buy or sell. Many retail traders in the fx options trading industry use this technique to make a big profit in the market. Though this strategy is very profitable still you should trade this market with managed risk.
Scalping is one of the swiftest plans for the traders. Usually, the traders take their trades in the lower time frame to make a quick profit. In this trading system, traders can trade within a few seconds. Here the trade happens by making the spread or buying at the bid price and selling at the asked price. A Scalper tries to hold on to their positions for a brief time and by this the possibility of future risk reduce.
Normally, a scalper avoids lofty volumes and tries to get their benefit by the tiny move as it is a repeated process. With the level of profit being small per trade, scalpers search for more liquid markets to escalate the regularity of their trade. Scalpers are different from the swing traders as they like the quiet markets that aren’t articulate to sudden price swing that helps them to make the spread continually on the same bid price. Scalpers may do mistakes as in this trade traders don’t get time to plan for trading.
Costs intrinsic with the trading strategy
Once active trading strategies were done by professional traders only and there is a reason behind it. It provides the opportunity to minimize the costs that are associated with high-frequency trading and also guarantees a better trade implementation.
To improve your profit at trading, lower commission and greater execution play a very important role. Remarkable investment in buying hardware and software is essential to carry through these strategies.
Besides, in real-time market data, active trading may be restrictive for independent traders and becomes unattainable for them. These are the reasons why the strategies, that take a buy and hold stance, provide lower costs and fees in trading. Active traders search for alpha with the hopes that the profit from trading will overpass the costs and will go towards a long time strategy.