Types of Stock Trading

A variety of different types of stock trading exist within the market. The type of trading that is conducted varies depending on the firm or individual conducting trades. While financial instruments are available in many different types, including funds, bonds and currency, the way these securities are exchanged depends on the risk an investor would like to take and the overall ability of the trader to leverage already existing financial assets.

Day Trading

Day trading is a type of stock trading that purchases and sells financial instruments during a single day. All positions are finalized by the time the market closes at the end of the trading day.

Swing Trading

Swing trading uses a method of buying and selling stocks and other securities during a period of cycles. The idea is to purchase a financial instrument during a period of low cost and sold when it has cycled to a higher value. It's a longer-term method than day trading but less than other types of stock trading.

Scalping

Scalping is a principle in which an investor attempts to make the most amount of profit available in securities through the spread of the bid/ask price. Basically, an investor buys a financial instrument at a low bid price and sells at the higher asking price.

Trading the News

The concept of trading the news involves the process of buying and selling stocks based on financial releases, changes in energy prices, information about labor strikes, poor sales and other factors that affect a company. This is done either manually or automatically using an algorithm.

Arbitrage

Arbitrage uses the process by which a stock or other security that sells in more than one market at a different rate. The concept is based on the idea that an investor can buy a financial instrument in one market at a low price and sell it on the other market at the higher price. This is very common with currency trading.

Resources

• Online Stock Trading Guide