Four common trading strategies investors use in a bull market are buy and hold; increasing buy and hold; retracement additions; and full swing trading.
Buy and Hold
This is the simplest strategy and it is utilized by passive investors. It is aimed solely at profits from a sustained bull market. Once a long position is established in the market, investors simply maintain the position until they see clear and unmistakable signs of a market reversal that ends the bull market.
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Increasing Buy and Hold
This strategy is for investors who are more active and slightly more aggressive. They are looking to add to their holdings and profits as the bull market continues. It involves buying additional shares for every "x" amount of increase in a stock or mutual fund's price. For example, an investor decides to purchase additional shares whenever the stock price increases by an additional $5 a share. He or she buys additional shares in a stock originally purchased at $55 when the stock price reaches $60, $65, etc. The strategy is continued until the stock reaches a predetermined level, such as $100, or until the investor sees indications of the market topping out.
More aggressive investors, those seeking to make substantial additions to their holdings and at the most advantageous prices, watch for retracements or downward corrections during the course of the bull market. When such retracements occur, investors buy additional shares on the pullback, anticipating the market will resume its uptrend to give them additional profitable shares. For example, after a stock advances from $50 to $75 a share, the investor buys additional shares on a retracement back down to around the $60 to $65 level.
Full Swing Trading
The most aggressive investors attempt to profit from trading the interim swing highs and swing lows within the overall bull market, using buying and short-selling positions to make additional profits as the market moves back and forth. These investors are much more actively involved in monitoring the market and trading. They either follow the advice of market analysts or use their own charts, paying particular attention to momentum oscillators that indicate overbought or oversold conditions at identified support or resistance levels.
When they see indications the market has temporarily topped out, they exit long positions and initiate short-sell positions that look to profit from a downward correction. When technical indicators signal the correction is coming to an end and the market is about to resume its overall uptrend, they close out their short-sell positions and initiate new buying positions. They repeat the process of buying long, taking profits and selling short, and then taking short position profits and buying long again whenever significant market corrections occur. Because they recognize the existence of an overall, long-term uptrend, they may take larger buying positions than selling positions, weighting their trading in the direction of the general bull market.