Investors and online traders have a broad range of trading platforms such as STR Capital and options at their disposal. Some like to indulge in short term trading activities, while others may prefer to engage in a waiting game to make substantial profits via taking the long route.
You can split online trading into three categories. These vary from short term to medium and long-term term trading opportunities.
- Short term online trading, as the name suggests, is an opportunity that involved trading for a minimal time period lasting up to a couple of weeks.
- Medium trading opportunities may last from a few weeks to a couple of months.
- Last but not least, long term online trading ventures can hold securities from months to several years.
Each type of online trading comes with its own set of merits, and you can apply a trading strategy according to the availability of your monetary funds.
4 Types of Online Trading
Here are the four most commonly practiced types of online trading.
Day Trading
It is probably the most common type of online trading. It is a short term trading strategy where you purchase and sell securities within the same day. Traditionally, it is a type that is most commonly used by professional traders.
However, the evolution of technology and the emergence of a variety of CFD trading websites have made it possible for non-professional online traders to use day trading.
Different traders practice different types of this trading strategy. The most common ones are as follows:
- Scalping
- Price Action Trading
- Rebate Trading
- Momentum day trading
- Arbitrage
- Pattern trading
- Market making
- New trading/playing
Advantages of Day Trading
Day trading can be effective if you wish to make huge profits in a short period of time. However, it depends on the accuracy of your data and your research about the securities you want to purchase and sell.
Position Trading
It is a trading strategy for the longer-term where you can buy securities and hold them for a longer time period. The buying and selling decisions are usually dependent on researching market trends and the ability to predict future changes.
As a trader, you must buy security as the trend begins and sell it when the trend is at its highest.
Advantage of Position Trading
If you have accurate data, you can easily predict how the market will behave, hence increase your chances to make the most of your investment when the time is right.
Swing Trading
In this type of online trading, you take advantage of the price swings. These swings usually happen during certain phases of a trend’s lifecycle. As an online trader, you try to predict the lows and highs based on your data and research. Plus, it involves keeping your securities for more than a day in order to maximize your gains.
You just have to wait for the trend to gain momentum, and when you see it hit the peak, you cash in.
Advantages of Swing Trading
It is all about spotting trends and maximizes your profits once the trend achieves its momentum. It is a very lucrative strategy to benefit from the market’s volatility occurring during several stages within a trend’s lifecycle.
Scalping
It is a fast online trading strategy. In this type of trading, you take advantage of any gaps that are created by asking spreads, bidding, and order flows. You make a profit by selling securities at asking prices, which are higher than the buying price or the spread.
It is a short term strategy that reduces the risk taken by you as an online trader. Scalping involves smaller investments and profits per trade. It is suitable for frequent online traders known as scalpers.
Advantage of Scalping
The main advantage is the quick profit, and you do not need extensive analysis as a scalper.
Conclusion
The knowledge of trading is a must especially when you are a novice. Now that you know there are variety of online trading entities such as STR Capital; you can begin your own research and figure of which online trading is best suited for your needs.