Stock Market Strategies

By: EconomyWatch   Date: 23 November 2010

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EconomyWatch

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Stock Market Strategies are formulated to diversify the risk of the market participants or the investors of the Stock Market. Some of the Stock Market Strategies include:

  • Short Selling
  • Margin Buying
  • Derivatives

    Short Selling: Short Selling is one of the Stock Market Strategies that depends on sound technical and fundamental prediction and somewhat luck. Here the buyer borrows stocks from either a brokerage firm or its own shares in order to lend to short sellers. The buyer then sells it off in the market hoping the price to go down, so that the buyer can buy the stocks back and make some profit out of it. This Short Selling is banned in most of the Stock Markets as some unscrupulous traders artificially lower the price of the stock .

    Margin Buying: The Margin Buying as one of the Stock Market Strategies also depends on sound fundamental and technical predictions and luck. The buyer in margin buying borrows money to buy stocks and he hopes for the price to go up. It has certain regulations also which is followed while trading. For U.S.A. the margin requirements have remained 50 percent for many years now.




    Derivatives: Derivatives are financial instruments whose value depends on the value of the underlying asset. There are two types of derivatives that work as Stock Market Strategies:

  • Options: Options are types of derivative contracts where the buyer's and seller's future payoffs are influenced by other securities like common stocks.
  • Futures: Stock Market Futures is a part of Stock Market Strategies works as an exchange which allows a market where buyers and sellers can buy and sell particular amount of a product or financial instrument at a particular price at a date settled earlier. This Share Market Strategy has not yet gained huge popularity and is still far behind than normal trading.

    For More on Stock Market Strategies one may go to answers.com, about.com


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