When trading in the market, investors often use various strategies for increasing their profits and reducing the chances of risks. Such strategies may you in achieving your goal if implemented properly.
These strategies are 100 per cent legal and can be used and implemented in your trades and investment provided that you have a proper hand holding on them. Strategies like momentum trading, range trading, technical trading etc. have gained popularity in the market in last few years. However, using them requires proper knowledge and experience. If you are not experienced enough, it is better to take the services of an investment advisor who can use these strategies and generate recommendations based on research which can help you achieve your goal efficiently.
Today we will discuss about technical trading. We have already discussed about momentum trading. It is interesting to note that momentum trading is also a part of technical trading. The basic concept of momentum trading is very simple – invest in a stock when there are signs that the stock might rise and book profits. By following this concept, a momentum trader has already engaged himself in technical trading.
Let us take a detailed look at technical trading and also explore some of its types.
Table of Content
Trading Types: Exploring Technical Trading
Let us now take a look at some of the commonly used and legalized trading strategies which may help you in making the most out of the markets.
Different Trading Strategies
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Momentum Trading
This strategy involves screening and investing in stocks which show a significant movement in one direction. Investors analyze the momentum of movement in invest in such stocks to earn great returns.
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Technical Trading
This strategy relies on market graphs and charts. Traders analyze the charts and graphs and try to find out divergence or convergence, which acts as an indicator for buying or selling stocks.
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Scalping
This strategy is widely used by intraday traders. These traders place multiple trades in a single trading session and aim for extracting small profits from most of them. These small profits, when summed up translate into decent returns.
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Fundamental Trading
This strategy is widely used by long term investors. It focuses on analyzing the fundamentals of a company like acquisitions, reorganizations, stock splits, earnings etc. A company with sound fundamentals is preferred for long term investment.
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Swing Trading
This strategy is used by traders who stick to their position for more than a day. Swing trading involves the use of fundamental analysis because it requires for any change in the fundamentals of a company which provides enough time for investors to book decent profits.
Technical Trading – Detailed Guide
Technical trading is a broad style of trading and involves use of various indicators. There are thousands of indicators available in the market which are used by technical traders all around the world. Every indicator is suitable for a different situation and thus there is no fair comparison between them to find out which one is better than the other. There are indicators which can be used for large cap companies while some may be good for penny stocks.
Technical trading is not only limited to trading. This strategy involves the analysis of historical market data for predicting future market movements. However, it is a known fact that forecasts are not always true, especially when forecasted by newbies. It requires immense knowledge and experience for an effective forecast.
Technical indicators
Some of the commonly used technical indicators include:
- Range Trading
- Relative Strength Index
- Pattern Analysis
- Trend Analysis
- Gap Analysis
These are some of the technical indicators which are used by technicians and researchers around the world for analyzing market movements.
Conclusion
Technical trading may sound easy, but it is not. Due to the availability of multiple indicators and their limitations in various cases, it is very important to choose the most suited technical indicator in the given circumstances. Choosing the wrong indicator may result in an incorrect forecast and can cause huge losses. Therefore, if you are not experienced enough it is recommended to take the services of an investment advisor. These advisors have a team of certified and experienced researchers and market technicians who are expert in technical analysis and can provide trade recommendations based on it.
Happy Investing!
