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Professional traders like specialists or market makers used to handle day trading, but electronic trading has provided new traders with this opportunity.
Fremont, CA: Active trading means the act of buying and selling securities depending on short-term movements to gain from the price movements on a short-term stock chart. An active trading strategy is different from the long-term buy and hold strategy, common among passive or indexed investors.
Here are four popular active trading approaches:
Position Trading
Position trading is a form of active trading when done by an advanced trader. This type of trading uses long term charts ranging from daily to monthly, along with other methods to identify the trend of the current 
market direction. This trade could last from several days to several weeks or even longer, depending on the trend.
Trend traders look for higher highs or lower highs to establish the trend of security. They identify the direction of the market but do not predict any price levels. Trend traders get on the trend after it has established itself, and when it breaks, they exit the position. In periods of high market fluctuations, trend trading is harder, and its positions are usually lowered.
Day Trading
In day trading, securities are bought and sold within the same day. Professional traders like specialists or market makers used to handle day trading, but electronic trading has provided new traders with this opportunity.
Scalping
Scalping is a quick strategy used by active traders, including exploiting different price gaps because of bid-ask spreads and order flows. It makes the spread or buying at the bid price and selling at the asking price to get the difference between the two price points. Scalpers try to hold their position for a short time, decreasing the risk related to the strategy. They seek more liquid markets to raise their trade frequency since the level of profits per trade is small. Scalpers prefer quiet markets that are not prone to sudden price movements so that they can make the spread constantly on the same bid-ask prices.
Swing Trading
By the end of a trend, there is some price variability as the new trend tries to establish itself. Swing traders buy or sell as that price change sets in. The trades are generally held for more than a day by a shorter time than trend trades and create a set of trading rules based on technical or fundamental analysis.
The trading rules are created to determine when to buy and sell a security. Although a swing-trading algorithm does not have to be accurate and forecast the peak or valley of a price move, it needs a market that moves in a direction.
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