Technical method

The technical method concerns all market tools and is directed on reception of fast profit. Technical traders estimate history of activity of the company (in a case with shares), schedules analyze and price movements, estimate trading models in the past and on this basis predict that can happen in the future and can even trade volume during time period.

The technical method includes studying price movement of trade volumes to specify models of type of the head and shoulder and other formations. Other indicators include the support and resistance levels, sliding averages etc.

The main lacks of a technical method

The main lacks of this method of trade are:

Too big dependence on last behavior of the market tool.

Set of technical indicators. There is no ideal indicator for each market tool.

Trade on an inter market spread

Trade on an inter market spread consists of a long position on one market tool and a short position on other tool which are among themselves closely connected. The logic of work on an inter market spread consists in that purchasing and sale of two various tools effectively uses correlation between them. Trade on an inter market spread consider very difficultly feasible as she demands transactions at different stock exchanges. It is applied basically to commodity futures contracts.

Trade on arbitration

Also known as “free risk profit”, the trade system through arbitration is produced through simultaneous purchasing and sale of the market tool to get profit on differential in the price. This trading system is usually applied at different stock exchanges or trading platforms. The investor can earn on price difference of the market tool at two various stock exchanges because of fluctuations of exchange rates.

For example, the trader buys the share at a foreign stock exchange which wasn’t adjusted for constantly changing exchange rate. He buys the undervalued share and sells the overvalued share, thus, getting profit on a difference.

Other method of trade on arbitration consists in that the investor wants to sell the market tool at determined price. He places the warrant on sale at this price and simultaneously places the warrant on purchasing at higher price. As a result, other investors then can purchase the tool at the first price, having tempted more with the heavy price offered in the second warrant. As soon as the first warrant on sale is performed, the investor cancels the second warrant on purchasing.

Thus, he not only gets rid of the illiquid assets, but also gains on it good money.

Trade on arbitration usually practices large institutional investors with mullions-strong assets. Trade on arbitration is most effective on low-liquidity markets. So now you know about all these styles and methods of trade and you can choose the one that is better for your trading.

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