Types of Stock Trading

Day Trading

Day trading is the act of buying and selling a financial instrument within the same day. You can even do this act multiple times over the course of a day.  The main motive of the day traders is to take advantage of small price moves of stocks.It can be can be a very profitable affair but it can also be extremely risky  for those who are new at it or who don't rely on a well-thought out method.

Day traders seek to make money by exploiting minute price movements in individual assets (usually stocks, though currencies, futures and options are traded as well), usually leveraging large amounts of capital to do so. In deciding what to focus on – in a stock, say – a typical day trader looks for three things: liquidity, volatility and trading volume.

• Liquidity allows you to enter and exit a stock at a good price (the stocks which can be easily converted into cash are liquid stocks).
• Volatility is simply a measure of the expected daily price range—the range in which a day trader operates. More volatility means greater profit or loss.
• Trading volume is a measure of how many times a stock is bought and sold in a given time period (most commonly, within a day of trading, known as the average daily trading volume - ADTV). A high degree of volume indicates a lot of interest in a stock. Often, an increase in the volume of a stock is a harbinger of a price jump, either up or down.

Short Term Trading

Short-term trading refers to those trading strategies in stock market or futures market in which the time duration between entry and exit is within a range of few days to few weeks.Short term trading can be very risky and unpredictable due to the volatile nature of the stock market at times. Within the time frame of a day and a week many factors can have a major effect on a stock's price. Company news, reports, and consumer’s attitudes can all have a positive or negative effect on the stock going up or down.

Medium term Trading

A trade period from a few weeks to a few months is considered as medium term trade. A trend is followed with tailoring stop loss. Medium-term traders hold positions for a few days, taking advantage of fundamental factors and technical setups. Compared long-term trading, medium-term trading has the lowest capital requirements. However, there are fewer trade opportunities for this type of trading.

This type of trading involves looking at multiple time frames and the use of technical indicators, such as moving averages and stochastics. Aside from those, it also makes use of support and resistance levels, trend lines and extensions, and pivot points. Candlestick formations and chart patterns are also useful.

Long Term Trading

 Long term refers to holding an asset or security for an extended period of time. Depending on the type of security, a long-term asset can be held for as little as one year or for as long as 30 years or more.