The purpose of employing stock trading and investing strategies is either an attempt to take advantage of fluctuating market conditions or merely to avoid them altogether. The fact that any strategy is susceptible to the effects of large market swings inspires investors to seek strategies that not only yield profits, but that also offer some form of protection from a volatile market.

Directional Investing

Directional investing is employed by those who believe they will be able to accurately predict the movement of the price on a security. If they believe that the price of a stock is about to rise, they buy it, and if the price is about to fall, they sell. Market timers, equity investors and trend investors are all prime examples of this type of strategy. Each of them depends in some way on the market causing their chosen securities to rise in value. Such stock trading and investing strategies are the most susceptible to the volatility of the market.  An increase in the volatility of the market can, in fact, produce a temporary directionless market rendering the predictions of these investors ineffectual at best.

Non-Directional Investing

Non-Directional investors attempt to take advantage of market inefficiencies and stock pricing differences. Instead of exclusively depending on the market to increase the value of their best guessed preferred stocks over time, these investors rely on the fact that at any given time, there are stocks available that are over priced and those that are under priced. Two examples of this strategy include event driven investing and fixed income investing. Event driven investing is usually incited by corporate upheavals, declarations of bankruptcy or mergers. Each of these events cause dramatic fluctuations in the prices of a given corporation’s securities which the investor seeks to take advantage of as quickly as possible. Fixed income investing, on the other hand, yields a yearly fixed return, usually in the form of bonds. 

Portable Alpha

This investing strategy does little in the way of stock trading within closed markets. Rather, it involves investing in areas that have little to no correlation with the market so that the investor can see returns regardless of market conditions.

Probability Based Investing

Probability based stock trading and investment strategies are, like non-directional strategies, primarily non-linear investment patterns. They are designed to produce profitable returns under a wide range of conditions in the market.  To employ the most common of layman’s terms reserved for the stock trading world, these strategies rely primarily on a diversified portfolio whose stability is based on maintaining both long and short positions within a diverse array of securities.