What Are the Different Stock Trading Strategies?

When it comes to stock trading strategies, there is no one strategy which would suit all investors. There are various different kinds of strategies which different kind of investors use in the stock market. The strategy used by them usually depends upon their risk appetite and the amount of money they want to invest in the stock market. Let us discuss about the most commonly used strategies in the following paragraphs.

The first and the most commonly used strategy is the buy and hold strategy. In this strategy, the investor picks up the stocks in which he believes in and these companies would give good return on investment in the long term. This is also known as long term investments and it is usually safer way to invest since investors usually pick up blue chip companies which are well established and drive the industry. This type of strategy is ideal for beginners in stock market since they are not aware of stock market complications. Therefore, they can just pick a few blue chip companies and invest in them.

The other type of investment strategy is known as top down strategy. As the name suggests, in this strategy the investor first chooses the market, then the strongest sector in that market, then the best stocks within the sector. Lastly, he waits for the best time to invest in that stock. As easy as it sounds, this strategy is not for beginners or less informed investors. This strategy is suitable only for the expert level investors since they have the knowledge and information about the global markets.

Apart from the above mentioned strategies, one more strategy which is common is the bottoms up strategy. This is exactly opposite to the top down investing strategy. This strategy is also known as cherry picking strategy since this has nothing to do with analyzing the markets or sectors. The decision to buy or sell that particular stock depends solely on the performance of that stock irrespective of the industry or market.

In addition to the buy and hold strategy, top down strategy and bottoms up strategy, there are a few other strategies which investors use. These include defensive investing, dollar cost investing, contrarian investing strategy etc. No one investment strategy in the stock market can be suitable for all types of investors, therefore it is advisable for beginners in the stock market to talk to their financial advisors and decide which strategy fits in best depending upon their risk appetite.