Active Investing Advantages in Stock Trading

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A broad term for a trading strategy that sees one buying, selling, and constantly monitoring the market and certain profitable or risky conditions, active investing has many advantages. Following is some information about the overall utility of this strategy.

Active Investing

Active investing is the opposite of passive investing. This trading approach has investors monitoring stock closely for the right times to buy and sell. This also entails looking into certain conditions that can influence price. Buys and sells on stock may happen frequently when an investor conforms to this strategy, as capitalizing on market conditions and certain scenarios is key in active investing.

Active Investing Advantages

Unlike the passive, or buy and hold strategy, active investing means that a trader will be there when certain conditions affect stock. If a stock shows a short downward trend, and turns around slightly, the active investor may buy into it. If a security shows a new downward trend that seems to be continuing, she may unload shares. A quick but sharp rise could mean another key time to sell for the active investor, as she follows the course of any stock that concerns her. She will embrace the short term bull market.

The main active investing advantage is that the approach allows for money to be made quickly. With buys and sells that occur frequently, likely a trader capitalizes on every slight dip or rise in stock to make the most of it. This allows for a large volume of trades, a well diversified and constantly evolving portfolio, and, when a trader is right about expected course of stock, short term return. This strategy capitalizes on volatility, which does not concern the passive investor.

Often, a lot of short term limit and stop orders can really help traders realize short term goals when using this tactic. Also, this tactic gives a trader new insight into the market. She will begin to see the short term habits of certain securities, and how market conditions affect stock price.

Active Trading vs. Passive Trading

The active trader can buy and sell short term if conditions are right, whereas the passive trader may not even monitor stock, or refuse to trade for months or years, which he thinks will allow a concerned stock plenty of time to adjust to the favorable, expected course, and only then will trading be considered.

As often the most profitable stocks are those that show short term volatility and price fluctuation, an investor monitoring one of these securities can make the most out of her time by actively buying and selling as price moves around over just minutes, or hours, days, and weeks. The active investor must stay on her feet, ready to trade whenever the time is right, and close watch over the market will pinpoint these times for the trader.

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