If there’s one thing we can all agree the answer is: Trading on the price in the next trading period. For many of us, this means trading the market during the opening hours — before the market opens and stays open well into the morning — and continuing longs with low-cost shorts, until close-to-close (or the same close at close) and long the price.
But this type of trading rarely yields the highest return.
The problem with this method, even by those that do it correctly, is it results in a “bad” return — a return that doesn’t reflect the intrinsic value of the assets, and in many cases, is lower than the alternative methods.
There are other strategies that often produce higher returns, including high frequency trading (HFT), which is defined as shorting and buying stocks from low-cost competitors, and margin trading (MA), which allows you to keep holding stocks for a long period (typically three weeks from purchase) on margin.
We’ll look at them in the second half of the article
The question is: Which one is best? Well, for the answer I’ll suggest I’ll answer it this way: What your trading plan should be based on the price at the last close, where you plan to make a profit.
What’s the average return you’d expect given this buying strategy, and when the open market opens?
This is the “average return” for a long trade, based on my model.
(You’ll have to read the model to see how it came to this conclusion, but I figured it best to include it in our next article.)
Before We Begin
Let’s go through the model:
The first step (a) is to define the “buy order” of the “short position,” based on the short-term target price of the asset. This would be a short position that contains a small amount of cash, or an amount of shares less than your “price target” plus (1-1). We’ll call this a short position. (2) This is the target market price for the asset, which is based on (a), so let’s call that the target of the short position. (3) This is the target percentage for the long position, i.e. (4) A short position with a small amount of cash is defined by (1) = $ 1 + (a*b) + (a*c
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