- Investing in stock market calls for employing strategies that help investors and traders to maximise their gains. Other than commonly followed strategies, there are several overlooked stock market investment strategies that come with high potential and less risks.
- Covered call options, scalping and dollar cost averaging are a few such strategies that could help investors and traders make large gains.
If you are a stock market enthusiast, you very well know why it is imperative for investors to have strategies up their sleeve in order to eke out maximum gains. Generally, investors and traders resort to strategies which are followed most commonly.
However, there are several overlooked stock market investment strategies that come with relatively high potential and less risks. Covered call options, scalping and dollar cost averaging are a few such strategies that could help investors and traders reap large gains.
Let us shed some light on five such under-the-radar strategies.
Covered call options
A call option is one such stock market investment strategy which is often overlooked. It is a contract option that allows an investor to purchase a security at a strike price until the option expires. On the other hand, a put option allows buyers to sell a security at a particular price until the option reaches expiry.
A covered call option is written by an investor or trader when he or she is already in possession of a security. The covered call option strategy is used by stock investors to boost income and provide some downside protection.
Image Source: Analysts analysing stock price charts. © Rawpixelimages | Megapixl.com
Focusing on relative strength is one of the best stock market strategies to identify value stocks. There are always some stocks in the market that are trending higher even as the overall market is selling off. These shares perform well relative to the market as a whole or to a relevant benchmark. Technical analysts employ an indicator termed as the relative strength index (RSI) to generate overbought or oversold signals.
Five under-the-radar investment strategies to reap stock market gains
End-of-day trading strategy
Another overlooked approach, the end-of-day trading strategy is all about trading near the market closing. Such traders become active as the market draws to a close.
The strategy involves studying of price action in comparison to the previous day’s price movements. On that basis, traders can speculate how the price could move depending on the price action and decide on any indicators being employed in the system. However, traders must fix a limit order, a stop-loss order and a take-profit order to cut down any overnight risk.
Image Source: Stock prices in view. © Herrbullermann | Megapixl.com
Scalping is about cashing in on small price changes and making a fast profit off reselling. During an intra-day trade, scalpers prioritise making high volumes off small profits. Thus, scalpers seek to ‘scalp’ a small profit from each trade with an aim to accumulate those little gains into a significant size. However, this strategy should not be used without a strict exit strategy since one large loss could eliminate many small gains obtained during the trading session.
Even as dollar-cost averaging is employed mainly by beginners, and less preferred by experience investors, it is considered as a wise strategy for long-term investors. You can purchase shares irrespective of price and end up buying shares at a low price when the market is bearish. Then, as the time proceeds, your cost will ‘average down’. This, way, investors can have a better overall entry price for their shares. The history and math both suggest that it is a winning approach.
Investors and traders should always keep in mind that there is no silver bullet strategy or a fixed patttern for maximising their profits from stock markets. It is not always the most talked about strategies that would help you earn large profits. There are some overlooked, but sound investment strategies, which could also deliver sound results. However, investors and traders should only deploy these strategies after considering their goals and risk appetite.
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