Chapter 1 What Is Active Trading?
In This Chapter
• Several short-term trading strategies
• Assuming a higher degree of risk
• Using leverage to enhance capital
• Active trading as a supplement to investing
Most investment advice suggests that the best strategy for the average investor is to “buy and hold.” The idea is to identify great companies, buy the stock at a reasonable price, and hold it for years. An active trader, however, is more concerned with short-term profits from price changes in stocks and has little interest in what the company does or its future prospects.
Active trading is more risky because traders deal in volatile price changes over short time periods and often use leverage (short-term borrowing) to enhance their position. ...