Trading can be a lucrative way to make a living, but successful traders need a well-planned strategy to execute their trades. Position trading is one of the most common financial trading strategies used by investors and traders.
Position trading is buying shares or options to sell them at a higher price in the future, which creates an open position. For example, if someone bought 100 stocks from Exxon Mobil Corp. at HKD90 per share, then that person would have made an open position as they expect the price of each stock to increase so that they could sell it for a profit.
Contrarian investments focus on buying shares when they are not prevalent, meaning that they ask the buyer to make a move against the trend. In Hong Kong, contrarian traders follow specific market rules such as “Sell in May and go away” because it is believed that investors tend to sell their shares before the May holiday season every year. This strategy takes advantage of short-term price fluctuations daily or weekly, which can be highly profitable if timed correctly.
Price Action Trading
Price action trading focuses on monitoring current share prices on charts with no time limitations. The chartist buys stocks that are rising rapidly while selling stocks that are not making any progress. Traders often use candlestick charts to see the color of a stock’s price easily. For example, if a stock is red, then it means that share prices have gone down, and traders should sell them immediately. However, if a company’s shares are green on a candlestick chart, this means there is a significant rise in their current price.
All traders must be well aware of market trends to make accurate decisions about buying or selling stocks for profits. In Hong Kong, technical analysis involves studying past data related to the performance of companies and markets to predict future movements, which can help experienced traders get an edge over others by making wise investment choices.
This technique uses Fibonacci retracement to determine where a stock price could have hit bottom, and it is going to rise again. For example, if a trader bought 400 shares of a company at a particular market rate and prices fell quickly, they expect the price to rise again so they can sell them soon for a profit.
Leonardo Fibonacci discovered Fibonacci trading as an Indian numerology system in the thirteenth century. In this technique, each number from 0 to 9 has a unique value derived from adding up two numbers together. For example: 3+8=11; 8+5=13; 1+3=4. Referring to the example above, the price dropped quickly from HKD270 per share to HKD180. After a while, the trader expects prices to rise, calculated at a certain percentage rate, and sell their stocks for a profit.
In arbitrage trading, traders often take advantage of price differences in different markets. For example, if one stock is traded for HKD80 per share on one market platform, but the same shares are traded for only HKD78 per share on another platform, then an arbitrage trader will buy them from the second platform and sell them on the first one to make profit from this difference.
Quantitative trading employs advanced mathematical models and techniques to help traders make investment decisions on buying or selling stocks based on complex statistical data. For example, quantitative analysis is often used to determine the optimum level at which a company should execute its next share buyback program using its own money. This technique involves studying past data related to the performance of companies and markets worldwide to predict future movements, which can be very profitable if done correctly.
This technique focuses on providing liquidity when there is not much demand for stocks. Users can monitor share prices, buy out stocks available for sale at a lower price, and sell them at an inflated price to the first available buyer.