What Is Continuous trading?
A continuous trading strategy, often referred to as a continuous execution strategy, is an approach to trading that involves making ongoing trades throughout the trading day or over extended periods, rather than executing trades at specific, predetermined times. Here are the key aspects:
Ongoing execution: Trading positiosn are rebalanced at frequent intervals, often using automated systems.
Algorithmic implementation: These strategies typically rely on computer algorithms to analyze market data and execute trades based on predefined rules.
Adaptability: The strategy continuously adjusts to market conditions, aiming to take advantage of small price movements or market inefficiencies.
Volume management: Often used to execute large orders by breaking them into smaller pieces to minimize market impact.
Risk management: Continuous monitoring and adjustment of positions to manage risk exposure.
The opposite of continuous trading is discrete trading.
Continuous trading strategies are commonly used by institutional investors, high-frequency traders, and some advanced individual traders. They require sophisticated technology and often aim to profit from small but frequent opportunities in the market.
Continuous trading and portfolio construction are related:
Dynamic rebalancing: Continuous trading allows for ongoing portfolio adjustments, helping maintain desired asset allocations as market conditions change.
Risk management: It enables real-time monitoring and adjustment of portfolio risk exposures.
Implementation of complex strategies: It facilitates the execution of more sophisticated portfolio strategies that require frequent adjustments.
Liquidity management: Continuous trading can help manage portfolio liquidity by spreading trades over time, especially for large positions.
See also:
Technical indicator-based strategies