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Day trading involves buying and selling stocks within a day, with different techniques offering varying levels of risk and reward. Scalping and trend following are popular and easy techniques, while contrarian reversal and news replay are riskier. Scalping involves buying low and selling high, while trend following involves buying stocks that are rising or waiting for a valuable stock to fall. Contrarian reversal involves predicting when a trend will end, while news replay involves buying stocks based on media focus.
Day trading is the practice of buying and selling stocks in a relatively short period of time and always within the span of one day. There are many day trading techniques that offer traders different levels of risk and reward. Scalping and trend following are among the easiest and most popular day trading techniques. Contrarian reversal and news replay are less accurate methods that can offer higher potential profits.
Scalping is one of the day trading techniques that offers a simple way to gain education on day trading while making real investments. Compared to other day trading techniques, this just requires a good watch on market prices. The basics of scalping include buying a large volume of shares at a low price and then immediately selling those shares when the price rises, even by a small fraction. The idea here is that high volume will produce large profits with minimal risk because stocks sell so fast.
Trend following is another way of day trading without getting too involved with the intricacies of the market. This technique requires paying close attention to market news and prices. A trend is any stock price that continually moves up or down. A trader can buy stocks that he or she believes will continue to rise and make money or wait until a valuable stock falls to an acceptable level to buy. This method requires a keen instinct for trends and often does not follow any economic rules of trading.
Contrary reversing is similar to trend following, except that it involves predicting when the trend will end and the stock will turn in the other direction. This method requires traders to watch prices rise and sell at the moment they predict the value will fall. Rather, this technique requires traders to follow falling values and buy when they feel prices will start to rise. This method carries high risk because there is never a guarantee that prices will reverse.
News playback is a similar way to predict how a stock will perform based on media focus. This happens when a trader buys stocks that have been declared good investments by one or more financial media commentators, and the stocks are sold when they are determined to be bad. This is also one of the risky trading techniques of the day because there is no guarantee that a positive or negative comment in the media will alter the price of a stock.
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