Active Trading

The term active trading denotes active investment as it relates to trading. It can be used in reference to either the frequency with which trades are performed, or to an investment strategy. It is the direct opposite of passive trading.

When used with regards to the frequency with which trades are performed: Active traders do not normally invest in stocks, funds and other investment vehicles in order to hold these investments over long terms. Instead, they actively participate in markets by frequently buying and selling investments.

In contrast to passive traders, active traders perform large numbers of trades. Day traders are exceptionally active traders, opening positions (buying investments) and closing those positions (selling investments) within the same trading day.

When used with regards to investment strategies: The term active trading denotes investment strategies which aim to outperform market performance.

Active trading involves large numbers of transactions, and because of this it typically generates large numbers of brokerage fees.

Because the size of brokerage fees plays a direct role in determining the costs of active trading, performing a brokerage fee comparison is particularly important for active traders.

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