Monday, 30 April 2018

Explanation about Swing Trading, Arbitrage, Hedging, BTST and STBT Trading in Stock Market

Swing Trading:

In swing Trading position is taken with a view of short term resistances and supports, and trader tries to make the profit by moving fast in such scenarios. For Example, if long term trend is down, still the stock can show a pull back for say 4 to 5 days. A swing trader takes advantage of such movements. In case of swing trading, person has to act quickly one has to always book profit in time, as pullbacks doesn’t last longer, and the profits can be wiped out fast, if not booked at correct time.

Only those traders must try to trade intraday and initiate swing trades who are in regular touch of market, and have monitoring options with them. Those who are on the move and don’t have real time price monitoring options at hand must stay away from such positions. As intraday moves are swift, and swing moves are also swift, so timing is the key in such positions.

B.T.S.T (Buy Today Sell Tomorrow):

Buy Today Sell Tomorrow (B.T.S.T) is a strategy adopted when the trader see that today market is good, and next day also expect markets to open firm, and the stock is expected to open up in gap.

In such scenario, if the trader is holding 300 shares of one particular company, the trader can buy additional 300 shares of it to be sold next day. Now if the stock shows positive movement next day, trader can make profit on the additional 300 shares, which the trader sells it next day. Original 300 shares still remain in trader’s account and trader can profit on the additional shares bought by doing B.T.S.T.

S.T.B.T (Sell Today Buy Tomorrow):

Sell Today Buy Tomorrow (S.T.B.T) is done when the trader see market is weak today, and next day also think that markets may decline a little more. To take advantage of this trader can sell the stock that trader is holding to be bough the next day. 

For Example, If trader is holding 2 lots in one particular company in future, trader sell 2 lots on that day and buy back the 2 lots on next day at lower prices, thus making profit of decline. 

Always do S.T.B.T only if the expected decline is minimum or big. In case of a big decline, one must exit the stock, and wait till it takes support and not try to buy it the very next day.

Arbitrage:


NYSE - NEW YORK STOCK EXCHANGE

LSE - LONDON STOCK EXCHANGE

Arbitrage is defined as where risk in almost non-existent. In this advantage is taken of the price differences that prevail on different exchanges for the same stock. Risk is non-existent, as this is all about spotting the price differences, which shows clear profit present, and its not a prediction where the trader have to wait for the expected moves.

In arbitrage, one has to have adequate funds and stocks at hand. There are people who lend stocks and let people do arbitrage by asking a certain percentage in profit. This is an excellent option for those who are prepared to spend time in front of the terminal and spot and take advantage of price differences. They can make earn money.

Hedging:

Hedging is defined to reduce risk of adverse price movements in security, by taking offsetting position in related instruments like options or futures. But through hedging we can reduce the impact of that negative event on our portfolio. Hedging reduces risk, but it also can reduce the potential profits. 

As opposite positions are taken in hedging, if the hedging position is not reversed in time, we will lose profits that are receivable during an uptrend. So it should be clear to us that with the help of hedging we won’t generate positive cash flow. If applied efficiently, it will definitely safeguard us against the potential losses. Most portfolio managers, use hedging as an effective tool to reduce their exposure to various risks prevalent in this field.






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