Trading Strategies & Order Types

After-hours trading occurs after the regular market close, typically from 4:00 PM to 8:00 PM Eastern Time, allowing traders to react to post-close earnings reports and late-breaking news.

Algorithmic trading uses computer programs to execute trades automatically based on predefined rules and mathematical models, enabling faster execution and removal of emotional bias from trading decisions.

Backtesting is the process of testing a trading strategy against historical market data to evaluate how it would have performed in the past, helping traders assess strategy viability before risking real capital.

Breakout trading is a strategy that enters positions when price moves beyond a defined support or resistance level with increased momentum, aiming to capture the beginning of a new trend.

Contrarian investing is a strategy that goes against prevailing market sentiment, buying when others are selling and selling when others are buying, based on the belief that crowd behavior often creates mispriced assets.

Dollar-cost averaging is an investment strategy of regularly investing a fixed dollar amount regardless of price, which automatically buys more shares when prices are low and fewer when prices are high.

High-frequency trading uses powerful computers and ultra-low-latency connections to execute large numbers of orders at extremely high speeds, profiting from tiny price discrepancies and market-making activities.

Pairs trading is a market-neutral strategy that simultaneously buys one security and shorts a related security, profiting from the convergence of their price ratio when it deviates from its historical norm.

Paper trading is the practice of simulating trades without risking real money, allowing traders to test strategies, learn market mechanics, and build confidence before committing actual capital.

Portfolio rebalancing is the process of realigning the weightings of assets in a portfolio to maintain the original target allocation, systematically selling winners and buying underperformers.

Position sizing determines how many shares, contracts, or units to trade based on account size and risk tolerance, ensuring no single trade can cause catastrophic damage to the trading account.

Pre-market trading occurs before regular market hours, typically from 4:00 AM to 9:30 AM Eastern Time, allowing traders to react to overnight news and position themselves before the official market open.

Range trading is a strategy that buys at support and sells at resistance within a defined trading range, profiting from the repeated price oscillation between these boundary levels.

The risk-reward ratio compares the potential loss of a trade to its potential profit, helping traders evaluate whether a trade setup offers a favorable payoff relative to the risk taken.

A stop order becomes a market order when the security reaches a specified trigger price, used primarily for stop-loss protection and breakout entries.

Tax-loss harvesting is a strategy that sells investments at a loss to offset capital gains taxes, then reinvests in similar (but not identical) securities to maintain portfolio exposure.

A trailing stop is a dynamic stop-loss order that automatically adjusts with favorable price movement, locking in profits while maintaining protection against reversals.

Trend following is a systematic strategy that enters long positions in assets showing upward price trends and short positions in assets showing downward trends, letting winners run and cutting losers short.