Short Term Trading Systems

Short-term stock trading strategies by their very nature are expected to deliver valuable income over a brief investment period. At this point we will have a look at 3 short-term trading strategies and then try to give various guidance for the strengths and weaknesses of every style.

Stock Options

The old standby of long time traders is known as stock options. This segment is and has been better established with deep liquidity for quite a while and so is one of well known method for fast rewards in the market. It makes perfect sense what the strengths are of this platform – which is high name recognition, the liquidity, together with vast array of assets to sell and buy.

The key weakness of the stock option strategy is the high level of competition on many of the assets (that is to some extent offset by the small spreads on those stocks). The additional problem you can come across with a reduced amount of competitive securities is that spreads widen and so searching for a money-making exit strategy becomes more complex. Next there is also the potential situation of automatic action of barely in the money contracts at termination resulting in margin calls.

High Frequency Stock trading Systems

HFT systems are server-based computer programs which rapidly buy and sell securities utilizing computer algorithms to calculate market movements and also carry out trade orders on auto-pilot. Lots of computer programs available do the job so rapidly in the trades that the order rate is measured in orders per microsecond. The key benefits of having a system this way are the ability to front-run your trades earlier than other brokers and computers in the marketplace. This makes small profits for every position bought (and most probably instantly sold). Short-term stock trading strategies such as this truly are the gold standard when considering shortest duration.

The issue with this type of style is you are getting into a continual arms race with other option traders along with investment banks. There will always be a larger fish, with a lot more resources, and much better computer programming. Though no machine can profit each of the action, smaller capital firms will a lot more often get pushed to the margin where finally activity is not really justified by the returns.

Binary Options

The final of the short-term stock trading strategies I mention in this article is utilizing binary options. A lot of these contracts have become extremely popular within low capital option traders given their high yields and low transaction costs. It is also possible to trade profitably with as small as a hundred bucks at some brokers. The negative aspects to working with short-term stock trading strategies involving binary options allow for not so big order sizes (commonly not as much as $3000 per trade), minimal asset selection (only the most liquid assets are traded), and even limitedoptions for exiting trades after performed.