Important Strategies to Trade in Stock Markets

For a trader who wants to earn good profits from the stock markets, he should follow some strategy. The trader can trade in the intraday market or short term trading. The short term trading is also known as delivery based trading. The trader should master the strategy and then only should start trade in the markets. The trader can paper trade to practice the strategy and determine the efficiency of the strategy. Some of the important intraday strategies are:

1) Simple Breakout Strategy

 In the breakout strategy the range of the price movements of the stocks in the first hour is identified. The high of the range and the low of the range in the first hour are noted. The movement of the stocks is then identified after the first hour. If the price movement breaks through the high of the range an uptrend is anticipated. Thus a buy call can be initiated. If the trend continues as an uptrend the profit can be booked. On the other hand if the price breaks out from the low of the range a down trend is anticipated. A short sell signal is initiated in this case. If the trend continues in the down ward direction, the profit can be booked.

2) Pair Strategy

In a pair strategy, firstly a pair is identified having similar movements. That is two stocks or the commodities having the same movements. Then the price movements are identified to have a divergence in the values of the two stocks. When the two stocks will have a maximum divergence a buy and sell call is initiated. One of the Stocks is then longed and another is shorted. After the trades are in place, if the pair of stocks move towards their mean of divergence the profits can be booked in both the stocks. In this strategy the important step is to identify critical divergence. At critical divergence the trades are initiated.

If the trader is not comfortable with the strategies he can take the help of advisory firms which gives accurate stock market tips and advice on trading.