Day trading involves buying and selling stocks within a day. Scalping and trend following are simple and popular techniques, while contrarian investing and news game are riskier. Scalping involves buying low and selling high quickly, while trend following requires attention to market trends. Contrarian investing involves predicting when a trend will end and buying or selling accordingly, while news game involves buying stocks based on media focus. All techniques carry risks.
Day trading is the practice of buying and selling stocks in a relatively short amount of time and always within a day. There are many day trading techniques that offer traders different levels of risk and reward. Scalping and trend following are among the simplest and most popular day trading techniques. Contrarian investing and the news game are less accurate methods that can offer higher potential returns.
Scalping is one of the day trading techniques that offers an easy way to gain day trading education while making real investments. Compared to other day trading techniques, this only requires close monitoring of market prices. The basics of scalping include buying a large volume of shares at a low price and immediately selling those shares when the price rises, even by a small fraction. The idea here is that high volume will yield large gains with minimal risk because the stock sells so quickly.
Following trends is another way of day trading without getting too caught up in the intricacies of the market. This technique requires maximum attention to novelties and market prices. A trend is any stock price that continuously moves up or down. A trader can buy stocks that he thinks will continue to rise and make money or wait until a valuable stock falls to a level acceptable for purchase. This method requires a strong instinct for trends and often does not follow any economic rules of trading.
Contrarian investing is similar to trend following except it involves predicting when the trend will end and the stock will turn in the opposite direction. This method requires traders to watch prices rise and sell when they predict value will fall. Conversely, this technique requires traders to follow falling values and buy when they feel prices will start to move higher. This method carries a high risk because there is never a guarantee that prices will reverse.
News playback is a similar way to predict the performance of a stock based on media focus. This happens when a trader buys stocks that have been declared a good investment by one or more commentators in the financial media, and the stocks are sold when it is determined they are not good. This is also one of the risky day trading techniques because there is no guarantee that a positive or negative comment in the media will alter the stock price.
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