Methods of Day Trading

Arbitrage

Arbitrage is a profit making activity in which the profit is made on the same securities who are registered in different stock exchanges. When there is a difference in the price of the security in different exchanges,the arbitrageur (the person who engages in arbitrage) simultaneously buys at lowers price and sells it at higher price.

For eg- If any stock is registered both on NSE and BSE . If there is a difference in the prices of the stock in both the exchanges ,then an arbitrageur can buy that stock from the exchange where price is lower and can sell it in the exchange where the price is higher. In this way that difference will be his profit.

Market Making

Market making is an activity in which market makers which may be a company or an individual quotes both buy (bid price) and sell (ask price) prices of a financial instrument hoping to make profit on the bid spread (which is the difference between bid price and ask price). 

Momentum Day Trading

In momentum trading, traders focus on stocks that are moving significantly in one direction on high volume. Momentum traders may hold their positions for a few minutes, a couple of hours or even the entire length of the trading day, depending on how quickly the stock moves and when it changes direction,they execute the opposite activity.

For eg- A momentum trader has bought a stock at Rs 100 and it’s prices are going up and it has gone upto Rs 110,from the moment it changes direction and begin to fall the momentum traders sell that stock. 

Pattern Trading

As the name suggests Pattern trading refers to the trading in which traders buy and sell relying on the pattern that the stock forms in the market. As the stocks move up and down in the market, they tend to form recurring designs or figurative diagrams, called chart patterns. Trading on these patterns can give lot of profit.

Scalping

It is a technique of trading and profiting in stock market. It is a day trading strategy and focuses on taking very small profits from hundreds of trades. It involves taking quick and small profits, using the ask and bid differences.

Swing Trading

Swing trading is a speculative activity in financial markets where a tradable asset is held for between one and several days in an effort to profit from price changes or 'swings'.A swing trading position is typically held longer than a day trading position, but shorter than buy and hold investment strategies that can be held for months or years. Profits can be sought by either buying an asset or short selling.

Trading the news

It is a technique to trade any financial instruments, profiting on price fluctuation, that follows a sensitive news release. The trade is closed on the same day of opening the trade.