| Day trading is the practice of buying and selling | | | | Momentum trading is a strategy in which one believes |
| financial instruments, such as stocks, stock options, | | | | that stocks, or other financial instruments, move with |
| currencies, and futures contracts, within the same | | | | a momentum or trend. Thus, stocks that have |
| day such that your positions are usually closed before | | | | been rising are assumed to continue to rise. |
| the end of the day. | | | | Likewise, stocks that are falling will continue to fall. |
| | | | | A momentum trader thus buys stocks that are rising |
| Day trading used to be the sole realm of professional | | | | and short sells ones that are falling. |
| investors. In fact, many day traders work for | | | | |
| banks or investment firms. Advances in technology | | | | Contrarian Trading |
| and the Internet, however, have allowed even | | | | |
| amateur traders to day trading. | | | | Contrarian Trading sharply contrasts momentum |
| | | | | trading. Contrarian traders believe that stocks that |
| Day traders often borrow money to trade. This | | | | have been rising will reverse and fall. The contrarian |
| leveraging allows for a high potential rate of return | | | | trader buys stocks that have been falling and short |
| and large profits. Some day traders earn millions of | | | | sells stocks that have been rising. |
| dollars a year. However, day trading can also be | | | | |
| extremely risky. Without the proper skills and tools, | | | | Range Trading |
| day traders can just as easily and quickly lose | | | | |
| money. | | | | Day traders who range trade look for stocks that |
| | | | | have been consistently trading within a specific |
| Although collectively called day trading, there are | | | | range. These stocks rise after hitting a |
| several different styles of day trading. Some | | | | “support” price and fall after hitting a |
| trading styles include: | | | | “resistance” price. A range trader therefore |
| | | | | buys stocks that are near the support price and |
| Momentum Trading | | | | short-sells stocks that are near the resistance price. |
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