Stock Trading Based on Trends and Periods

Bryan Jackson June 18, 2018 Comments Off on Stock Trading Based on Trends and Periods
Stock Trading Based on Trends and Periods

When you invest in stocks, you’re not limited to the choices of day trading methods. You can also utilize various approaches to it like trend-following strategies, and you can even consider categorizing your strategies based on how much time you are willing to invest on them.

Meanwhile, it is necessary to emphasize that though these styles are easy to learn, they’re not altogether easy to actually perform. We will start the discussion on the importance of trying such tactics via paper or demo trading.

The Importance of Practice Trading

Before you do the actual forex trading, where you wager your money in the front line, you have to test the waters first. And the most effective way of doing that is to make sure that you have enough practice.

When you set up a forex trading account type, you have the choice to try demo trading, in which you can simulate actual trading without spending or risking any amount in your capital. You will only use virtual funds. Take advantage of this and experiment.

Try everything first and then take down notes and review them, preparing for the real market.

Trend Following

In this strategy, a trader enters a trade by buying a stock that is currently in an uptrend or by selling a stock that is in a downtrend, always expecting the trend to pursue its trajectory. You will then have to pursue the trade while using trailing stop loss orders until the trend finally reverses.

Other trading styles like momentum trading and pattern trading with trailing stop loss belong to this kind of strategy.

Contrarian Investing

In this strategy, you can enter a trade by selling a stock in an uptrend and buying a stock in a downtrend, expecting the trend to reverse soon enough. It’s counterintuitive for many other traders, given the rule of thumb to buy low and sell high. This kind of strategy requires you to have ample experience to rightly predict the reversal.

Range Trading

In this strategy, you can enter a trade by buying at the lower level of a range and then selling at a higher level of a range, while you expect the trend to continue within a specific range.

To perform this approach correctly, you need to use various kinds of indicators and support and resistance charts, which give you visuals and an idea about the range of the trend of the trade.

The Time Periods You have to Consider

Different trading strategies are done within different time periods. Some need only a day to be finished while you have to spend some time and therefore energy on other strategies. When picking a stock trading strategy, it is very important to consider the amount of time you will need to use.

Short-term trading involves holding the position for a few days to a few weeks. You buy a stock and hold on to it until after the time period finishes.

Medium-term trading lasts for a few weeks to a few months, with the trade being followed by a trailing stop loss.

Lastly, long-term trading involves you holding the stock from a few months to many years. You will have to make your decisions with the help of fundamental analysis of a company and its stock.

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