Learn different stock market trade strategies to profit from every market condition.

Different types of stock trading strategies exist and choosing between them can be a difficult decision.

Whichever you use, it should be a part of your complete stock trading plan and helping you narrow down your choices for stock selection. By disciplinary following a particular strategy combined with other research tools, such as technical analysis or fundamental analysis, you can increase your probability of success of your stock market trade.

Short-term stock trading strategies are used for trading ; their biggest risk is that overconfident investor will take on too much risk too early and find that they have quickly lost what they have worked hard for. Long-term stock trading strategies are used for investing ; they are often less risky, but the reward for successful stock market trade is accordingly lower.

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Short-Term Stock Trading Strategies

Momentum Stock Trading

Momentum stock trading is based on following the trend and your research should focus on finding stocks or sectors that are moving in a direction with some sort of strength (strong uptrend or strong downtrend).

Penny Stock Trading

Penny stock investment is focused on trading with stocks with very low price. generally under $5.00 per share. There is a higher risk involved in penny stock trading, since legitimate information on penny stock companies can be difficult to find and a stock can be easily manipulated.

Shorting Stocks

Shorting a stock is strategy to profit from a decline in a stock price. Since stock can drop fast and significantly and because of lack of regulation in this area, this type of strategy is known as more risky. It used to be available only for limited group of professional traders, but today with brokers offering margin account and with evolution of new financial instruments like for example short ETF’s, it is becoming more and more popular also among other traders.

News Trading

News trading is focused on following the most important news announcements real-time. macroeconomic news releases (unemployment, interest rate change, GDP growth. ), earnings releases of companies, bond auctions, political speeches, etc. This stock trading strategy if very short-term oriented, usually geared towards Scalping or Day Trading.

Extended Hours Trading

Pre-market or after-hours stock trading is done most often in combination with news trading. Trader buys or sells a moving stock before market opens or after market close and then closes the position inside regular trading hours. Not all brokers offer the possibility of trading outside regular trading hours.

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Medium-Term (Swing) & Special Stock Trading Strategies

Gap Trading

Gaps are areas on a chart where the price of a stock moves sharply up or down with no trading in between. Gaps occur for example if a company’s earnings are much higher than expected; the stock price opens higher than it closed the day before, thereby leaving a gap. Traders are exploiting these gaps and looking to profit as the stock price reverses to fill the gap. More about gap trading.

ETF Trading

ETF trading is designed to spread out risk because an ETF contains a basket of stocks in a particular region or sector. ETF trading is usually combined with a momentum trading strategy. Could be short, medium or long-term.

Elliott Wave Theory

The Elliott Wave trading strategy is based on a theory that investor psychology moves stock prices up in a series of five waves and down in a series of three waves. Traders are focused on charts to identify these waves.

Fibonacci Trading Strategy

One of the most common uses of Fibonacci sequence in trading is using Fibonacci Retracement Levels. This form of technical analysis refers to the likelihood that a financial asset’s price will retrace a large portion of an original move and find support or resistance at the key Fibonacci levels before it continues in the original direction.

Contrarian Investing Strategy

Contrarian investing strategy attempts to profit by investing in a manner that differs from the conventional wisdom. when the consensus opinion appears to be wrong. For example, widespread pessimism about a stock can drive a price so low that it overstates the company’s risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains.

Following Insiders

Following insider trading reports involves researching major insider trading transactions. Insiders are directors and officers of a company and also stockholders who own more than 10% of equity in a company.

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Long-Term (Buy & Hold) Investment Strategies

Income Investing

Investing for income or income investing strategy is focused on stocks with high dividend yields. This type of stocks experience little volatility and typically are safe investments paying dividends year after year, which are passed on to the fund investors. The objective of this strategy is mostly income generation through dividends while keeping risk at a minimum.

Value Investing

Value stock investing strategy researches stocks from profitable companies that are fundamentally undervalued comparing the stock price to their true worth. People who invest in these companies need to understand the fundamentals of a company to understand their true value. The objective of this strategy is a combination of capital appreciation (growth) and income generation (through dividends) with moderate risk.

Growth Investing

Growth investing strategy is focused in stocks with a high growth potential. These stocks are riskier than value stocks, as they have a potential to go sour. Many of these stocks do not pay dividends since they reinvest their profits in business expansion. The objective of this strategy is mostly capital appreciation but at the cost of higher risks.

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Use Trading Plans for Consistency