Hundreds of trades daily in an attempt to make a small profit from each trade by exploiting the difference between the bid and ask prices.
Momentum trading: Momentum traders look for stocks that are moving significantly in one direction with high trading volumes. These traders try to capitalize on momentum to achieve the desired profit.
Technical trading: Technical traders focus on charts and graphs. They analyze stock or index chart lines for convergence or divergence signals that may indicate buy or sell signals.
Fundamental trading: Fundamental traders trade companies based on fundamental analysis, which studies events occurring within companies, particularly actual or expected earnings reports, stock splits, reorganizations, or acquisitions.
Swing trading: Swing traders are fundamental traders who hold their positions for more than one day. Most fundamental traders actually rely on swing trading, as changes in company fundamentals typically take several days or even weeks to create sufficient price movement for the trader to realize a reasonable profit.
Announcement, which is the period when the company issues a statement indicating whether it will meet, exceed, or miss earnings expectations. Trades often occur immediately after this announcement due to the potential availability of a short-term momentum opportunity.
Similarly, analyst upgrades and downgrades may represent short-term trading opportunities, especially when a prominent analyst unexpectedly downgrades a stock rating. The price behavior in this case can resemble a rock falling off a cliff, so the trader must be quick and agile in short selling.
Stock splits
Many investors believe that because they want to buy a $10 stock more than a $20 stock, a stock split heralds an increase in the company's market value. However, remember that this does not fundamentally change the company's value.
