Active Trader

What does it mean to be an active trader? From the term itself, active, it means you are doing it repeatedly and doing it most of the time, if not always. Active trading happens when a buyer or a seller buys or sells his security at a fast pace, on short term movements. Active trading is the contrary part of the buy-and-hold strategy. For the buy-and-hold, the type of strategy is for a long term basis. The profits are assumed to be visible after years, and it is assumed that it will overshadow the short term price movements. There are four active trading strategies, the most common ones, the day trading, the position trading, the swing trading and the scalping.

Position Trading

Day Trading is the most prominent type of active trading and sometimes it is associated with the term itself. From the term ‘day’, no purchasing or selling happens overnight, everything happens within 24 hours. This type of style is usually practiced by professional traders, specialists and market makers.

Position Trading is quite confusing because it is somewhat similar to a buy-and-hold strategy of trading making it a long term instead of a short term and going back to the definition of active trading it should be short term. It is included or recognized as a short term trading because though it uses daily charts to monthly charts, it only serves as a basis and is just being used to determine the current trend. The people who dwell on this style are the ones who follow the trend. They do not try to predict the trend anymore and just come in when the trend has established itself. This style takes advantage not just the upside of the market movements but the downside as well.

Swing traders come in after the position trading just happened or after a pattern or a trend finishes up. These traders dwell on the unsure, from its term ‘swing’, it is like swinging the bat and basing it on random hits. This type of trading requires more than a day to cause sufficient price movement and actually earn a profit. They do not aim for the peak or the valley but they do aim for a direction, and if the trend goes sideways, it is when they lose.

Scalping happens when the strategist is earning little by little. They target the small profit that happens very often rather than a large profit that seldom happens. They prey on the small moves, and markets that move gently, they make the spread and buy at the bid price and also sell at the ask price only if they spent less and they will still earn.

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