Stock Market Trading

With the invention of the internet, online stock market trading activity has exploded over the past 10 years. Volume on the exchanges has increased dramatically due to the accessibility of the exchange through a desktop computer and the innovation of many stock market trading systems which are set up to automatically place orders when specific conditions are met. All the data which the professionals are looking at has become available to the general public; thereby, removing some of the barriers to entry which existed in the past. Online stock market trading has also eliminated the need for many of us to employ brokers who take large commissions for placing trades on our behalf. Placing a trade is now a mouse click away and at a much reduced cost.

Let’s review some of the major forces which are driving the trading activity in the markets.

Stock Market Day Trading

Short term trading has probably garnered the most attention over the past decade. With access to real time data, many traders have flocked towards buying and selling stocks within the same day to take quick profits out of the market, day in and day out. Stock market day trading is extremely fast and requires an extremely focused individual who has strict adherence to a set of rules. A day trader may place anywhere between 1 and 100 trades per day, and even more if automated stock market trading systems are involved.

Visit our day trading education center to learn some of the cutting edge trading strategies which are used by many professional day traders.

Stock Market Trading for the Long Term

The buy and hold approach used by many investors does not have much influence on the markets on a daily basis. Typically, investors will put money into their 401k or other retirement plans and mutual funds will continue to rebalance as investors contribute and exchange funds in and out of these mutual funds. During times of market volatility however; many long term investors, including institutional investors, will put their money in cash or cash equivalents such as money market funds. An extreme build up in cash positions can have a very bullish impact on the market when this money re-enters back into the market.

Program Trading

Program trading is carried out by large institutions and money managers. Program trading should not be confused with automated trading. It actually has nothing to do with automated stock market trading systems. A program trade is the purchase or sale of a basket of stocks (15 or more) which results in an aggregate transaction value over $1 million. Program trades are typically done through a computer and allow institutions to place orders directly into a market makers book.

Program trades can have different reasoning behind them. They can be put on to gain exposure to a sector, rebalance a portfolio, or even engage in index arbitrage to take advantage of short term price between the futures and the cash market.

All in all, program trading accounts for about 30% of all stock market trading activity and is restricted to certain times of the day as it can create volatility in the market.

Mutual fund redemptions are a great example of program trading. Every day, as investors rebalance their portfolios, mutual funds will need to buy and sell stocks to account for these changes. Typically, you will see this happen in the final hour of trading.

Algorithmic Trading

Over the last 10 years, algorithmic trading volume has exploded. There are many tools now available to the public to back test data and make generalizations on future market movements. Neural networks and other indicator based systems are good examples of this. Tradestation offers an automation tool that traders can use to create strategies, back test them, and ultimately set up to run automatically. There are many dangers in this type of analysis as most traders are successful for a period of time and then the market shifts, causing the strategy to no longer work. I do not know of many traders who have successfully implemented a stock market trading system.


With the evolution of online stock market trading over the past few years, it is important as traders that we understand the different factors which are driving the activity in the markets. This is especially the case for those of you who are trading on the shorter term. The market is now more vulnerable to shorter term gyrations than it was in the past as there are so many different types of investors with differing reasons for investing. The first step to getting started with stock market trading is to understand the dynamics and different types of players in the market.

Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...
Day Trading Simulator provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for...

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