STOCK TRADING APPROACHES
There are two main approaches to stock trading:
01. ACTIVE APPROACH
This is the more common of the two approaches. The decision to buy stocks involves analyzing the company, reviewing the historical share price trends and understanding the current forecasts. Active investors are guided by the growth and intrinsic value of the stocks. This approach is mostly applied by the investment managers who manage mutual funds, pension funds and separately managed individual accounts.
03. PASSIVE APPROACH
This approach is opted for by investors who prefer low-risk, high-yielding stocks and invest money in them mainly for their retirement accounts. This approach assumes the efficiency of markets in the longer term. It is, however, not synonymous with the strategy of ‘buy-and-hold.’ Rather, it implies buying at low prices and selling when the stocks have reached a high price level.