Exploring Stock Trading Strategies

Choosing between different stock trading strategies can be a difficult decision.

In this section I will briefly go over some of the most common types of strategies. It is a good idea to make yourself familiar with several different types.

The type of stock trading strategies you choose are part of your complete stock trading plan. They are a particular focus that you can use to narrow down your choices for stock selection.

By using a particular strategy combined with other research tools, such as technical analysis or fundamental analysis, you can increase your probability of success.

While there are people who invest for the long term with some type of Buy and Hold strategy, the following examples are geared more towards Short Term Investing/Trading. Read more about Short Term Investing/Trading here.

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• Momentum Stock Trading: Sometimes called Trend Trading, this type of trading is based on doing research and finding stocks or sectors that are moving in a direction with some sort of strength.
• Penny Stock Trading: Trading low priced securities with a small market capitalization generally priced under $10.00 per share.
• Insider Following Trading System: This type of trading involves doing research on major insider trade transactions which are filed with the SEC. It can be used in any type of trading.
• Shorting Stocks: Shorting is merely a procedure to profit from a decline in a stock price. Shorting has been given a bad name in the past. I believe this is mostly due to the lack of specific regulations, or complying with regulations. Not because it is terribly wrong as people have been given the impression.
• News Trading: This type of stock trading strategy is designed to place trades based on real-time news releases. It is usually geared towards Scalping or Day Trading.
• Gap Trading: "Gap Trading" can be described as placing trades at the level of extremes during an opening gap, either higher or lower, while looking to profit as the stock price reverses to fill the "Gap". It can be geared towards Scalping, Day Trading or Swing Trading.

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• Extended hours Trading:
• Pre-Market Trading: Pre-Market Trading is a trading strategy used in Scalping and Day Trading. Pre-Market Trading hours are from 7:30 a.m. to 9:30 a.m. and is done most often in combination with News Trading. The hours accessible for trading are specific to your broker.
• After Hours Trading: After-Hours Trading is also used in Scalping and Day Trading. After Hours Trading is from 4:00 p.m. to 8:00 p.m. and is available depending on your specific broker.

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• ETF Trading System: ETF investing is designed to spread out risk because an ETF contains a basket of stocks in a particular sector. ETF trading is usually combined with a Momentum Trading System.
  
  Free 30 Day Trial of MarketWatch's ETF Trader Newsletter
  This is a weekly newsletter that concentrates on investing and trading Exchange Traded Funds (ETF's). The system detailed in the newsletter uses performance data and statistics to determine specific picks.
• Dividend/Income Stock Trading Strategy: Some people buy high Dividend producing stocks or exchange traded funds, to produce a steady income. Dividend trading is usually done by a long term investor.
• Elliott Wave Principle: Ralph Elliott lived from 1871-1948. The Elliott Wave principle is based on a theory that investor psychology, which moves stock prices, goes from being pessimistic to optimistic and back again, forming patterns that can be recognized. Once you learn a little about how this works, you will be amazed at what you can see in different charts.
• Fibonacci Trading Strategy: Leonardo Fibonacci was an Italian mathematician who lived from 1170-1250. One of the most common uses of Fibonacci in trading, using Fibonacci Retracement Levels, is a form of technical analysis that is based on the belief that a stock's price will retrace part of its recent move to specific support or resistance levels.
• Trading Stock Options: Stock Options are basically contracts giving you the right but not the obligation, to buy or sell stock shares at a specified price.
  
  Free 30 Day Trial of MarketWatch's Options Trader Newsletter
  Trade Options? This is a low cost weekly newsletter to learn about Options Trading as well with analysis and trading opportunities.
  
  Here's a good resource that will help explain Option Trading from the basics up through real trading examples.
• Intraday Trading Strategy- One Big Asset Class: Trading an individual stock or ETF using multiple asset classes for analysis.
• 123 Reversal Pattern The 123 Reversal Pattern is an example of a simple intraday trading strategy that occurs on a regular basis.

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All of these stock trading strategies are widely used in everyday trading. The more you learn about each of the different techniques they use, the better prepared you will be. Every time I learn more about any one of them, I always remember seeing the particular patterns or the opportunities that existed, that I missed out on because I didn't know at the time.

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