Trading is the type of Day Trading wherein financial instruments or any form of tradable assets are bought and sold in a single trading day. The ultimate goal of day trading is to gain profit by buying financial instruments and then selling them for a higher price. Beginners in day trading usually buy and sell stocks, a form of financial instrument. However, stock trading does have a high casualty rate even with experienced day traders which is why if you’re still a beginner, you must carefully choose among the dozens of stock trading strategies.
The three most common stock trading strategies used by beginners include spread covering, technical trading, and scalping. All three strategies can gain you profit.
Spread Covering Strategy
The “bid” price is the amount of money you put on the line to purchase stocks. If you buy stocks for $20 per piece, that means your stocks have a bid price of $20 each. The “ask” price is the amount of money with which you sell your purchased stocks. For example, if you sold your stocks $25 a piece after purchasing them for $20 each, your stocks have an ask price of $25.
The “spread” is a term used to denote the difference between the bid price and the ask price. Basically, if the difference between the two is larger, you can make more profit out of your stocks. When using the spread covering strategy to trade stocks, you want the “spread cover” or the difference between the bid price and the ask price to be wider so that you can make more money compared to when there’s just a small difference between the two.
Technical Trading Strategy
Technical Trading Strategy is one of the most complex ways to trade stocks but even beginners can get the hang of it with enough education on the field. This stock trading strategy involves technical analysis of market trends. After analyzing market trends, beginner day traders can predict the future prices of stocks and come up with decisions based on those predictions. Ideally, purchased stocks must be sold at the times when their asking prices are predicted to be high.
Scalping Strategy
Scalping strategy is the easiest way that day traders can make money out of their stocks. Unfortunately, the scalping technique doesn’t earn much. With this strategy, stocks are only kept for a short amount of time and sold as soon as their prices become higher than the bidding price. For example, if stocks were bought at $2 per share, they can be sold at $2.50 per share within 45 minutes after they were bought.
