Trading Strategies

Trading strategies can be broadly classified as below:

i. Technical Analysis    ii.  Intra-Day Trading   iii. Pairs Trading   iv. Selling Short   v. Momentum trading strategies  

Technical Analysis: The technical analysis is majorly based on charts & a number of parameters like SMA crossing, EMA crossing, RSI, MACD etc. Depending on different patterns formed on the charts & the value of these parameters, traders take long or short position on an asset. E.g an RSI of 80 is considered overbought and this can be used as a signal for sell whereas an RSI of 20 is considered as oversold & can be used as a signal to buy along with the confirmation from other parameters.

Intraday Trading:  In day trading, a breakout occurs when a stock has surged above a significant area of price resistance. The breakout could occur above a consolidation point or above a downtrend line. A breakout can also occur on the downside. Depending on the break-out & volume, a long or short position can be initiated.

Pairs Trading: This strategy is based on the fact that 2 or more number of financial instruments have a relative movement & this relationship can be established using historical data. Trader attempts to capitalize on imbalances between these instruments, such as stocks or funds, in anticipation of making money when the abnormality is corrected.

Selling Short: In this strategy the trader generally borrows the instrument from the broker to sell in the market without owning it in the first place. This strategy is followed when the trader feels that the asset is overpriced. The risk in short-selling is relatively huge as compared to buying puts & so is generally not preferred by retail traders.

Momentum Trading Strategies: This strategy is based on the fact that stocks which are making new highs or are winners for quite some time, they continue to do so whereas the losers go on their losing streak. So in this strategy, the traders take long positions in the winners & short sell the losers.

                                                                Submitted by: Group No. 2

                                                        Ananya Mishra(007/54)                                                                                      Ritika Bhamara(0015/54)                                                                        Mayank Deora(0036/54)                                                                        Nayan Ranjan Chattopadhyay (0039/54)                                                                Pawan Kr Rathi(0045/54)                                                                                                                        

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