Day Trading and Investing: Popular Methodologies

Day trading investing has become a popular way for investors to take control of their own investment portfolios and to become more involved in the day-to-day changes in the stock market and make a profit from those shifts. By using popular methodologies, traders can enter into the investment trading market and make their own profits.

Many of these methods are used by day traders and, in fact, traders may employ several different methods as they research and investigate stocks.

  • Trends – Following trends is one of the foundational methods when it comes to day trading. Traders may following the trends of a specific stock for months, weeks or days before they decide to purchase or trade the stock. Often trend following involves the use of online research tools that are available from different indexes where stocks are traded or from tools that are available from their online trading account company.
  • Range – Range trading is the opposite of trend following. With this method, traders research and determine the range at which the stock is trading over a period of days, weeks or months. They calculate what is called the “resistance point” where the stock will shift between high and low and bounce back and forth. This range gradually shifts over time as the stocks either begins to range lower or higher over time.
  • Contrarian – Contrarian trading strategies work off of the foundational idea that all financial investments have a cycle of rising and falling. Investments that have been on the upswing eventually begin to fall – this is the natural cycle according to this investment/trading theory. As a result, traders using this method follow stock trends and look for shifts where they begin to see that a stock is beginning to move into an upswing position or a down-swing position.
  • Scalping – Originally, scalping was called spread trading. With this method of day trading, quickness and fast trading are instrumental in profit-taking. Day traders scalping take advantage of any existing gaps between the bid and ask price for a particular stock, especially when a floor trader is looking to minimize their liability or exposure on a stock.
  • Rebate – Rebate trading is a trading strategy that involves high volume low priced stocks. This is an equity trading method that allows for profits from the ECN rebate and provides tremendous liquidity for traders because it works off of the rebate.
  • News Playing – News playing is a trading method where a trader takes advantage of either positive or negative news announcements from a company that affect how a stock is traded. Very often rumors and trends swirl several days before an actual announcement is made, so it is important that traders using the news playing strategy closely watch stocks for which there are rumors floating.

There are many different strategies and methods which can be employed by a day stock trader or investor. By using several different strategies that overlap, a trader can increase their likelihood at being able to make a profit.

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