DEFINITION of 'Stag'
Stag is a slang term for a short-term speculator, equivalent to a day trader who attempts to profit from short-term market movements by quickly moving in and out of positions. Day traders, or stags, typically require access to a lot of liquid capital in order to fund their positions, since they may be attempting to gain returns on very small price movements. Stags often use techniques associated with technical analysis as the basis for their trading decisions, since long-term fundamental analysis typically does not help when looking to make quick trading decisions over the course of hours or minutes.
BREAKING DOWN 'Stag'
A stag specifically refers to a speculator who buys and sells stocks in short time frame's to make quick profits. A stag investor assumes that the price of a stock will rapidly increase over the short-term, within the first few hours or days, and adopts an investment strategy that is the opposite of a long-term buy and hold strategy.
Large institutions, rather than private investors, become stags or conduct strategies of stagging. This is due to the fact that in order to profit from small short-term price movements, large blocks of stocks, normally during a company's initial public offering (IPO), must be purchased. Large purchases during an IPO inflate prices in the near-term and allow stags to sell the initial investment for a profit. One strategy of stagging is when an institution applies for a large number of shares in an IPO, with the assumption that the purchase volume will inflate demand beyond the shares available for sale, driving up sales volume when the equity hits the public markets.
Difference Between Stags, Bears and Bulls
Bull traders and bear traders are the two most common terms used to describe the thought processes and actions of an individual investor. In fact, the two terms have grown to describe macroeconomic financial environments. However, a stag is still a common type of investor, and it's important to understand the differences in trade strategies and mentalities.
A bullish investor, or one who believes in bull markets, is a person who assumes that the markets will positively increase over time. Buy-and-hold strategists are normally bull investors. Bearish investors, on the other hand, are those people who believe that the stock market dips in the near-term or long-term, and aims to profit off the dips. Conversely, a stag is more of a strategy than an ideology, and is executed by a stag investor, normally in hot IPO markets in which he can earn quick profits from high volume.