Do you know which of the three short-term trading categories you’re in? Or, if you’re just getting started with buying and selling of securities, are you aware of the different ways to take part in the action as a short-term investor? Actually, there are many ways to aim for short-range profits in the stock market, but most people have only heard of one of them: day trading. For those who want to know more about some other techniques, and who are drawn to the short game, here are descriptions of three strategies, with an added category for short-term folks who don’t trade securities at all.
You’ve heard of day traders, but what are scalpers? These high-octane market enthusiasts have time-frames even more compressed than a single daily session. They deal in minutes, sometimes in seconds. The goal of scalpers is to chip off tiny profits using large amounts of capital. Often, they’ll be in and out of a position within a minute or two. Most of them have years of experience and very large account balances.
They need both to be successful on these lightning-fast deals. An example is if a scalping pro believes XYZ shares will rise by one-eighth of a point, or 12.5 cents per share, he or she might purchase 1000 shares, wait for the price rise (assuming it happens) and then sell, pocketing a $125 profit. If wins outnumber losses per session, a good scalper can net enough money each day to earn a living from these quickie trades.
The name day trading is apt, because those who do it close their positions before the end of each day’s session. However, unlike scalpers they often leave positions open for hours at a time. Every now and then, if circumstances dictate, they might get out in a few minutes to pocket a big gain or limit a loss. How do people learn the techniques behind effective day trading? They often use simulators to gain experience without risk of losing their capital. These robotic apps are very good at teaching newcomers how to place trades, how to set limits on gains and losses, and how to practice price watching.
The key thing that sets swing trading apart from scalping and day trading is the overnight hold, as they say in the securities business. In other words, a swing position might last for a number of days but typically less than two weeks. Many part-time and newer investors are attracted to these timelines because there’s not as much pressure nor is there a need to make rapid-fire decisions. In fact, it’s common for swing traders to have several positions open at the same time.
Precious Metal Speculators
For those who are averse to the traditional securities markets, the precious metals offer an opportunity to do some very short-term speculating. Actually, you can go short, medium, or long-term with the metals, but the short-termers in this segment call themselves metal scalpers. Gold and silver are their preferred metals because of liquidity and price volatility. Some specialize in just one of the PMs, however.