Strategies

A Sector Rotation Strategy with Exchange-Traded Funds (ETFs)

A sector rotation strategy is one that is undertaken by investors by actively managing their portfolios through asset allocation based on the status of the economic cycle and the businesses that tend to perform best at that specific point in the cycle. The term “sector” is used to describe a group of stocks that [...]

The Benefits of Using a Limit Order

A limit order (also known as a “buy limit order” or a “sell limit order”) is a type of order stock investors use to buy or sell shares at a specified price or better, allowing investors to set the maximum price they will pay on a buy order or the minimum price they will accept [...]

How Stock Traders Use a Bracketed Sell Order

A bracketed sell order is a strategy of placing three simultaneous orders to take a short position on a particular security. The three components of a bracketed sell order include: (1) an initial short position (2) a buy stop order and (3) a buy limit order. Under this strategy, the investor seeks downside [...]

How Stock Traders Use a Bracketed Buy Order

A bracketed buy order is the use of three orders placed simultaneously to take a long position on a stock. The three components of a bracketed buy order include: (1) an initial long position (2) a limit sell order and (3) a stop market loss order. Each component is set at a price [...]

An Active Investing Strategy

An active investing strategy refers to the buying and selling of stocks or other securities in an effort to exploit short-term market conditions for profit. Active investors are those who tend to continuously monitor and adjust their holdings, rather than take a long-term approach to investing. While active investing can be highly profitable, [...]

What is the Difference Between Market Arbitrage and Risk Arbitrage?

Arbitrage or “market arbitrage” is the practice of simultaneous buying and selling in two or more different markets to exploit a price differential between them. The profit for the arbitrageur is the difference between the market prices. For example, an arbitrageur might short-sell a stock at the higher price and buy at the [...]

How a “Buy the Dips” Stock Investing Strategy Works

Under a “buy the dips” strategy, investors look to purchase a stock or index that has seen a recent price decline. The idea behind the strategy is to exploit market fluctuations with the belief that, as long as the investment remains sound, the price should eventually rise again. Like a value investing strategy, [...]

A Pairs Trading Stock Investing Strategy

Pairs trading or “statistical arbitrage” is a stock trading strategy through which the investor simultaneously buys and sells two (normally) correlated stocks when they diverge from their typical pattern with the expectation of capturing a profit when the pattern returns to normal. Pairs trading is a market neutral position that enables the investor to [...]

Inverse Exchange-Traded Funds (ETFs) for Portfolio Downside Protection

An Inverse ETF (exchange-traded fund) is a type of ETF that is built using various derivatives and assets to take advantage of the declining value of its underlying index. Inverse ETFs are traded on public exchanges and can provide investors with many of the same benefits as short-selling without all of the downside risk. [...]

Understand and Profit from a Short Squeeze

The term short squeeze is used to describe a rapid increase in a stock’s price due to the combination of short supply for the stock and excess demand. A short squeeze results when short sellers rush to buy a stock to cover their short positions and minimize their losses; as the price of the [...]