Online Stock Trading Terms Defined

Day Trading – day trading is a high-risk trading strategy which some traders use because of its correspondingly high potential for gains. In day trading, a trader starts the day with zero stacks and ends the day with zero stocks. The day trader will buy stocks which is supposed to rise within the day, and rapidly sell them after just a few minutes, hoping to make a profit in the incremental rise during the short interim between buying and selling.

Penny Stocks – penny stocks are used to refer to low-priced speculative securities. They can be stock in certain private companies that are not being actively traded, ot holdings in very small companies. Penny stocks are priced below $5; they trade infrequently, so thare are certain difficulties involved in finding quotations for penny stocks. Also, they can be hard to sell once bought.

Options Trading – an option is a formal contract which allows a purchaser to buy or sell a security with a specified amount of time, at a fixed price. Option trading simply refers to the practice of buying or selling various investment opportunities.

Swing Trading – compared to day trading, swing trading is a less risky strategy for internet stock trading. A swing trader may hold onto a certain stock for a number of days, even weeks. In order to benefit from swing trading, the key is to be able to spot stocks that are due to rise and buy them out. The swing trader then holds on to their stocks as they rise in value, selling them just before the trend neutralizes or reverses.

Positions Trading – positions trading is a long-term approach to investing in stock options. It is generally recommended for those who prioritize stability over growth, such as those who are investing for their retirement. In positions trading, an investor chooses stock options in companies that have been proven to be stable. The stocks are held for a number of years, even decades, and the investor makes profits based on the dividends value of the stock. Positions trading helps to abosrb the impact of daily price fluctuations, so that over a long-term period, the investor shows some amount of profit. Granted, the potential for gains is steady but not that high. Still, other investors prefer taking this conservative approach in lieu of high-risk investment options.

These definitions are just some terms which every beginning stock trader needs to know. The definitions were adapted from the US Securities and Exchange Commission.