The cup and handle is both a continuation and a reversal pattern. The reversal pattern marks the end of a downtrend, and shows the price transitioning into an uptrend. The continuation pattern occurs during an uptrend; a cup and handle forms, then the price continues its rise. The cup and handle is similar to a
The head and shoulders (HS) is a reversal pattern signaling the prior trend is reversing, or has already reversed. The HS top alerts traders that an uptrend is over and the price could head lower, while the HS bottom notifies traders that the downtrend could be over the and the price will head higher. Head
The size of a chart pattern, and where it occurs within a trend, provides clues as to how big the next price move will be once the chart pattern completes. When the price finally breaks out of the chart pattern (completion) this indicates the direction the price is likely to continue moving. Therefore, chart patterns
Technical traders use the price history of any asset, and the price patterns that form, as a basis for making trading decision and analysis. This is called technical analysis, a technique that uses the price chart of an asset as a key determinant in forecasting where the price will go next. Price charts are highly
Scalping is a trading strategy geared towards profiting from minor price changes in a stock's price. Traders who implement this strategy place anywhere from 10 to a few hundred trades in a single day with the belief that small moves in stock price are easier to catch than large ones; traders who implement this strategy are known as
A day trader executes short and long trades to capitalize on intraday market price action resulting from temporary supply and demand inefficiencies. BREAKING DOWN Day Trader A day trader often closes all trades before the end of the trading day, so not to hold open positions overnight. Day traders' effectiveness may be limited by the bid-ask spread, trading commissions, as well as expenses for real-time
Swing trading has been described as a kind of fundamental trading in which positions are held for longer than a single day. Most fundamentalists are actually swing traders since changes in corporate fundamentals generally require several days or even a week to cause sufficient price movement to render a reasonable profit. But this description of swing trading is a simplification.
What Is Buy and Hold? Buy and hold is a passive investment strategy in which an investor buys stocks (or other types of securities such as ETFs) and holds them for a long period regardless of fluctuations in the market. An investor who uses a buy-and-hold strategy actively selects investments but has no concern for short-term price movements and technical
What is Active Trading Active trading refers to buying and selling securities for quick profit based on short-term movements in price. BREAKING DOWN Active Trading Active trading seeks profit from price movements in highly liquid markets. For this reason, active traders generally focus on volatile stocks, foreign currency trades, or derivatives. Active trading requires a more
Active trading is the act of buying and selling securities based on short-term movements to profit from the price movements on a short-term stock chart. The mentality associated with an active trading strategy differs from the long-term, buy-and-hold strategy. The buy-and-hold strategy employs a mentality that suggests price movements over the long term will outweigh the price movements in
