Best Trading Strategies

What is a Trading Strategy

What is a Trading Strategy? A trading strategy is a very detailed process that specifies the price levels at which you'll enter and exit trades. Your strategy uses analysis to pinpoint different market circumstances and price levels. The majority of strategies concentrate on using technical indicators. However, some strategies can also involve the use of fundamental analysis to estimate price changes. When trading the financial markets, it is important to take time to build a strategy you can stick to. Otherwise you will find yourself making rash, uncalculated decisions. You will not maintain the consistency and discipline needed to have any success as a trader. It is completely up to you which strategy you follow. However, the most important factor to consider is whether the strategy is something you can stick to; and can you stay disciplined enough to execute this strategy long term.

In-depth Articles on Trading Strategies

Scalping Strategy

Day Trading

End of Day Trading

Swing Trading

Trend Trading

News Trading

1. Scalping Strategy

One of the best trading strategies is scalping, which involves making numerous trades that last for very brief periods of time ‒ sometimes lasting a few seconds, minutes or hours ‒ and involve minimal changes in price. Scalpers aim for a small return from each trade, with the idea that all those little earnings will eventually add up and pay off big.What scalpers need to be aware of, however, is their exit strategy since a considerable loss can cancel out tons of other small gains that may have accumulated. When scalping, traders tend to settle for a rather small profit from each trade due to its quick nature, as scalpers usually employ a 1 to 1 risk to reward ratio or less.

Pros

Focus on one trade at a timeShort holding timesScalping involves less analysis of the fundamentalsThere is more opportunity to trade

Cons

Trading costs can accumulate quicklyRequires a lot of screen timeScalping can be psychologically tiring

Scalping Tips

Scalping traders usually concentrate on profits around 5 pips per trade.Best done in the early hours of the trading day, when the market opens, as it's generally the most liquid and volatile time.Some of the best strategies to apply when scalping are the stochastic oscillator strategy, the moving average strategy, the parabolic SAR indicator strategy, and the RSi strategy. Scalping tactics perform best when the intraday momentum is strongly trending or strongly range-bound; they perform poorly when there is contradiction or uncertainty.

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2. Day Trading Tips

For traders who want a hands-on, action-packed approach to trading, day trading - otherwise known as intraday trading - is a good approach. It is also ideal if you want to make trading your full-time job.Intraday traders make the most out of price changes that happen between opening and closing hours of the market. This helps them to also avoid overnight risks since day traders typically close all their positions by the end of the day. Since day traders frequently keep many positions open during the day, it is recommended that they employ a well organised trading plan that can quickly adjust to market volatility.

Pros

Trading during the day helps to avoid some common risksA plethora of trading opportunities can be applied

Cons

Day trading is prone to flat tradesMultiple transaction fees can eat up your capital

Day Trading Tips

When creating a day trading strategy you must consider which markets you will focus on, which day trading timeframe will you choose, which indicators you will use, and how much capital will you allocate per trade? Choose two indicators and don’t clutter your charts with too many tools and indicators as you will get confused quickly! The moving average indicator is the most common to use when day trading. When trading the moving average indicator over a period of days keep an eye on whether the price is above or below the moving average. if it is above then it is indicating an uptrend in prices, or to consider going long. When the price is below the moving average then it’s time to consider sell opportunities or go short. Depending on where you are located and which markets you are trading in, the best time of the day to trade as a day trader is between 9:30 am and 4 pm Eastern time (US). This is ideal for stock market day trading. However, many day traders wrap things up around 11:30 am as that is when volatility slows down. Day traders need liquidity and volatility in order to day trade successfully, so you want to keep your eyes out on patterns and timeframes that are volatile for each market.

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3. End of Day Trading

This method of trading requires traders to wait until the end of the day before making decisions. When it becomes obvious that the price is going to settle or close, that’s when an end-of-day trader analyses the market. This approach necessitates comparing today’s price action to previous days price changes to predict future price movements.This method is time efficient since one only needs to look at the data of the charts in opening and closing times. Some traders may use indicators and others may decide to trade naked basing their decision solely on price action charts.

Pros

A good starting point for new tradersA time efficient methodYou can keep your day job

Cons

End of day trading is vulnerable to overnight market movementsLimit orders might miss your desired priceVolatile pricing around earnings reports season

End of Day Trading Tips

Consistency is key, you want to decide on the best timeframe to use so that you can make logical decisions when tracking and following the trend.A trend trader's best strategy is to remain vigilant and keep an eye out for signs that the trend they are trading is coming to an end or changing in some way. This sort of awareness is absolutely key; after all, if you're not paying attention and recognise the trend's final stages, you could easily find yourself in a loss-making position when other traders come out from the woodwork trying to reduce their own losses.An asset's price may trend upward or downward. When the market looks like it might hit higher highs, that is a good time to take a long position, if you were going to do so. If the market looks like it will reach lower lows, that’s when a short position is better.Moving averages, the relative strength index (RSI) and the average directional index (ADX) are usually preferred by trend traders.

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4. Swing Trading

When it comes to best trading strategies, swing trading is among the most popular. This strategy mainly involves taking smaller profits from short term trends and quickly cutting losses, in order to create returns over time. Though the gains may be modest if held for a few days or weeks, they can add up significantly over a longer period of time.Swing trading focuses on recognizing price patterns over several days, sometimes weeks, and using those patterns to inform when best to enter or exit a position. As such, this method often risks lower losses with fewer gains made in comparison to other strategies over the same period. However, if practised effectively, swing trading can be a great part of a balanced portfolio.Swing trading has become one of the best trading strategies as it allows traders to navigate market fluctuations. This type of trading requires a deep understanding of how to interpret both the length and duration of swings, as these technical indicators signal where critical levels of support and resistance can be found. Swing traders must also keep an eye out for patterns in supply and demand, while taking into account whether momentum is rising or falling inside each swing ‒ both vital components to ensure success with this form of trading.

Pros

Applicable for part-time tradersRequires minimal time commitmentIt allows for multiple trading optionsIt does not keep your money tied down too long

Cons

Comes with a risk of weekend and overnight price gapsTiming market swings is difficultSwing trading costs can pile up quickly

Swing Trading Tips

Swing trading strategies are based on technical and fundamental analysis.Catching the trend and taking advantage of pullbacks and rallies are the goals of swing trading. A trader opens a position at a pullback and closes it at a rebound.The primary challenge for swing traders is separating the true trend reversal from the price activity that will most likely continue.Swing traders may more accurately enter trades, place stop losses, and capture gains by learning to read technical indicators and daily charts.

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5. Trend Trading

Trend trading is arguably one of the best trading strategies as it uses intricate technical analysis to identify trend directions and only places trades in that direction. This requires an effective system to determine trend movements, one with accuracy and updated frequency to ensure success. Although trend traders may often be mistaken for having bullish or bearish characteristics, following the trend instead has its own advantages.Various tools can be used for market analysis, and with trend trading, adopting patience and adaptability become important virtues. Awareness is key too ‒ trend traders must utilize their senses to detect when a influencing factor (such as market change) renders the system dysfunctional. To sum up, trend trading is undeniably a powerful strategy but also bears its risks ‒ which is why developing a strong technical analysis system and staying vigilant are necessary skills.

Pros

You could spot trends right awayTrend trading requires minimal transaction costsYour entry/exit points don't have to be that accurateTrend trading doesn’t take up too much time

Cons

Comes with a high risk of fakeouts and low hit ratesFOMO mentality is big in trend tradingTrend reports can be slowIt’s not easy to ride a trend until the end

Trend Trading Tips

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6. News Trading

The method of news trading involves trading both before and after news releases depending on news and market expectations.Given how quickly news may spread through digital media, trading on news announcements might call for a strong mindset.As soon as the news is revealed, traders must evaluate it and decide quickly how to make their trades based on the news and events happening.

Pros

News affects trendsNews trading offers multiple trading opportunities

Cons

Open trades are vulnerable overnightThe trap of simplicity

News Trading Tips

Learn how to apply a “buy the rumour, sell the news” trading strategy.Rather than waiting to trade once a news announcement breaks out, base your trading decision on price action movement before the announcement.This can protect your trades from any volatility that may occur once a rumoured news release breaks out.

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Disclaimer: The content of the primeindexgroup.com website and any posted in our Trading Signals Telegram Channel is intended for educational purposes only and is not to be construed as financial advice. Trading the financial markets carries a high level of risk and is not suitable for all investors. When trading, you should consider your investment goals, experience, and your appetite for risk. Only trade with funds you are prepared to lose. Like any investment, there is a possibility that you could sustain losses of some or all your investment whilst trading. You should seek independent advice before trading if you have any doubts. Past performance in the markets is not a reliable indicator of future gains.

primeindexgroup.com take no responsibility for loss incurred as a result of signal alerts posted inside our Telegram Channel. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the final decision to place the trade yourself. We have no knowledge of the level of money you are trading with or the level of risk you are exposing your account balance to on each trade.