Trading Techniques - Essay Example

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The trading techniques in financial markets are explained as the plan for attaining maximum return through purchase or sale of stocks and securities by taking long or short positions in the market. The trading of shares and stocks are done either manually or in an automated…
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Trading Techniques
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Download file to see previous pages The day-trading technique involves the strategy of taking a position in the market so that the return against the trading could be optimised at the end of the day. In this technique, the day trader focuses on the movement of the share price throughout the day. The positions taken in the day-trading technique is only for a few seconds or minutes. The trading of shares and the returns and risks related to the trading of the share are realized at the end of the day. The position of share trading is not carried over to the next day (FAMA, 1970, p.385). Thus in the day-trading technique, the trader could determine the net position of profit and loss on a daily basis.
The swing trading technique requires the trader to identify the trends of the share price movements of the stocks. The swing in the share prices over a particular range could be identified to be favourable by the trader in which the trader desires to maximize the returns of the stock with the swing of the increasing share prices (JEGADEESH and TITMAN, 1993, p.68). The technique of swing trading is not a speedy process of trading as the trader holds the stock positions for days and weeks as per the analysis of the swing movement of the share prices. The effective implementation of swing trading techniques helps in the growth of equity base. There are various types of swing trades. The swinging stock price may depict up swings which reflect increasing prices of stocks, down swing which reflect declining prices of stock, short swing movements and the long swing movements. The position of the stocks is held by the trader based on the anticipation of the swing movement of the share prices (LO and MACKINLEY, 1988, p.48).
The trend trading is another technique where the trader determines the movement of the share prices in the long run. The trend trading techniques is a simple technique of optimizing the returns from the ongoing fluctuation trend of the share prices and anticipation of how far ...Download file to see next pagesRead More
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