Trading is a process that deals with the buying and selling of stocks, commodities, and securities within a time duration. When we talk about stock trading, the attempt and intention is to time the market.
The ultimate goal is to capitalize on short-term market trends and events to sell shares for a profit and buying them at a low.
Some traders engage in buying and selling of stocks multiple times throughout the day. In comparison, others may participate monthly or annually by placing trades.
Before putting their money into a particular stock, traders do extensive research about the business using technical and fundamental analysis concepts and various stock research and charting tools.
With the advancement in technology, trading is practiced using various application programming interfaces (APIs). It’s highly recommended to go for a free stock api if you plan to get into stock trading in 2021.
Some Surefire Trading Strategies To Apply In 2021
If you are passionate about trading and make money from it, you must devise several strategies to adapt to different market situations that will arise in 2021 to beat the market average.
The market volatility has been unpredictable several times in the past. Therefore, a sound understanding and planning is always a prerequisite before jumping into trading.
Here are some proven strategies which, when implemented precisely, can do wonders for you:
Day Trading
It’s one of the most popular trading techniques which involves opportunistic buying and selling of stocks and securities several times within the same day.
Positions are squared off before the market closes for the day; thereby, no stocks are held overnight.
Short Selling
Short selling is instrumental in producing profits during the bearish phase, i.e., when the stock market is declining.
Here, the trader borrows equity shares and then sells them on the open market, intending to rebuy them at lower prices.
Thanks to its complicated steps, shorting stocks really takes a great deal of training and experience. However, new traders that try their hand at this lucrative strategy can get big rewards in 2021.
Position Trading
It’s also considered a buy-and-hold strategy. In this method, the key is to determine the trend in the current market direction using long-term charts and other technical analysis tools.
The trade may last anywhere between a couple of days to several months, depending on the market situation. Accurate tracking of price movements across time could earn you huge profits.
Gap Strategy
In this strategy, traders search for stocks having a decent price gap from the previous close. They carefully observe the stock for the first 1-2 hours of trading to estimate the trading range.
If the stock price rises above the range, it’s fit for buying, and if not, it signifies a short. Gaps are broadly classified as breakaway, exhaustion, common, and continuation gaps.
Follow The Trend
It’s quite a simple strategy to understand where the traders simply ride on the market trend. Successful traders don’t try to predict the market price but try to buy when the market is up and sell when it is pointing down.
Of course, there’s some mathematical analysis required to track the stock price movements effectively.
Best Trading Tips To Get Better Returns In 2021
A trader, in general, is not interested in the fundamentals and financials of a company but the volatility of its share. It’s the stock price and market movement that excites an active trader.
These tried and tested tips can generate profits for you in 2021 if you implement them according to the market situations and reactions.
Educate Yourself
Having basic knowledge about trading is not going to help. Traders are expected to keep themselves updated about the latest stock market news, future events, and declarations.
Do your homework to arrive at the strategies of stock picking and analysis of certain factors that play a decisive role in market volatility. Refer to financial websites, business news channels, and books on financial markets.
Risk Management
While you can still rely on your intuition, it’s not advisable to be trading on a whim. Sometimes, markets do perform contrary to the expectations and predictions of the participants.
In such a scenario, you must plan to square off or close your positions to avoid heavy losses. Based on the market situation, a trader should be able to decide whether to go for a market or limit order.
If you could sense that there is a high probability of a loss coming in the way, it’s better to go for a limit order. It guarantees more precision and can help you cut down your losses.
Go For High Trading Volume Stocks
Trading volumes depict the number of shares of a company traded in a day. You should also look for the trading volumes before deciding to pick a stock.
Lower trading volumes may force you to buy the stocks, causing your liquidity to decline over time.
Time Your Trades
As soon as the market opens, many trades are placed within the first hour itself, resulting in price volatility. Rather than being in a hurry, take your time to analyze the patterns and take positions accordingly.
Usually, the mid-hours are less volatile, whereas the price fluctuates heavily towards the end. So plan your timing to square off consequently.
Leverage Technology
Nowadays, various software and applications are built around stock trading, where you can do both trading and stock analysis on one platform. The plus point is that most of them are free of cost.
For the best results, algorithmic trading is the way to go. An algo trading api involves automated pre-programmed instructions and algorithms capable of efficiently computing variables like price, volume, and time.
Conclusion
Traders come across numerous strategies and tips at their disposal. But little do they know that none of the strategies, tips, or advice could guarantee success in the financial markets every time.
If you’re new to trading stocks, a more optimistic way of looking at this is to learn from the market and play your cards right.
Put your faith in the trading knowledge and experience you have gained so far, and 2021 will surely be a success!
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