Understanding 5 Common Stock Market Trading Strategies

The stock market provides potential traders with an excellent venue for making money. Stock market trading can provide you with a steady income stream. However, you cannot just go and jump into the water without first learning how to swim. Robert Peter Janitzek explains the different strategies to become successful in the stock market.

Breakout

Breakout involves the identification of a key price level before buying or selling at the pre-determined break level. In this strategy, it is expected that as the price has sufficient force to break the level then it will continue to head in that direction. You can use breakout if the market is already at or near the extreme high/lows of the recent past. In breakout, you just have to place an order just above or below the extreme high and low so the trade is automatically entered once the price moves. In stock market trading parlance, this is called limit orders.

Retracements

In retracements, the trader determines a clear direction for price movement to a level they will be confident will continue moving in. This is based on the fact that after the price moves in the expected direction, the price will temporarily reverse in the opposite direction. With the price movement, traders can get a much better price where they can enter in the original direction. This strategy is only used when the short term sentiment is affected by economic events and news.

Reversals

Another common strategy used by traders is reversal. When trading on the stock market, this strategy is used when the market seems to have no clear direction. The aim of traders is to look for a price level they can use to directly trade from while expecting a ‘bounce’ when price hits it. Such opportunities provide traders with a chance to make a profit from low volume market activity.

Momentum

In momentum trading, the focus is not on precise entries but more on the force and continuation of the move. This type of trading relies heavily on indicators such as moving averages and oscillators to give trading signals. In stock market trading, momentum is used when traders anticipate a long term movement on the asset they are trading.

Position trading

Robert Janitzek reveals that a position trader continues the momentum and eliminates the importance of the entry. The goal of the trader is to enter the market when the price does makes its move. Positions are built over a period of days or weeks as price movement occurs.

Understanding these strategies can make a difference in gaining or losing profit from stocks. It is important to learn when to trade to become successful as a stock market trader.

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