What are trading strategies and which should I choose?
How many times have you seen a Guru on YouTube or Facebook try to say that his/her strategy is the best and will work for anyone, and you should buy it off them for an eye watering price? This is what many traders have become accustomed to seeing in their feeds, but it’s not the way to learn how to trade or build a strategy.
Trading strategies with an Edge should be developed by yourself, as only you can build or build upon a strategy which suits your lifestyle. With this being said, here are the top 5 Trading Strategies which can be applied to any Market, at any time, by anyone.
Swing Trading is a Trading Strategy which focuses on profiting off changing trends within the market, normally over fairly small timeframes. Trades are usually held from 5 days to a few weeks, and focus on trying to catch upswings or downswings in price. Traders who use this kind of strategy often rely on indicators to help them identify areas of value within the market, and where to enter/remove profit from a position. Swing trading is one of, if not the most, popular trading strategy and therefore features high up on our list of Top 5 Trading Strategies.
Position trading is essentially Swing Trading but on a much larger timeframe. While Swing traders tend to use the 1 to 4 Hour timeframes and sometimes the Daily, Position Traders focus more on the Daily, Weekly and Monthly charts. Position Trading is a Strategy in which trades are held for weeks, months and sometimes years. Traders identify if a market is either in a long term bullish or long term bearish trend, and then buy or sell based on this analysis. Many call this Buying and Holding, as Buy trades are much more common with this Trading Strategy than Sell Trades.
Trend Trading is one of the most popular Trading Strategies among Traders, therefore it features very high up in our list of the top 5 Trading Strategies. It’s also one of the simplest ways of trading the markets, all it requires is for the trader to identify a trend, and find a way to enter into said trade. As the age old saying goes, the Trend is your Friend. Traders can look to identify a trend or trending market in many different ways, but some of the most popular are; Reading Price Action, Technical indicators such as the relative strength index (RSI) or trendlines. Whilst a market is trending, traders will look to enter into it unless there is a reason otherwise, which usually comes in the form of a Price Action Pattern or Formation.
A Scalping Trading Strategy is also a very common strategy among Traders, hence why it features high up on our list of the Top 5 Trading Strategies. Scalping takes advantage of price movements over a small period of time, usually 1 minute to an hour. Scalping requires Traders to have strict rules on how they Enter and Exit trades, along with a strong case for their bias. Whilst Swing Traders often look to take no more than 10 trades a week, Scalpers can find themselves taking up to hundreds of trades a day. This Trading Strategy requires a lot of time spent at the screens and is often hard to backtest owing to the use of low timeframes. Traders who use a Scalping Strategy often find themselves using the 1 minute, 5 minute and 15 minute timeframes to trade with.
Day Trading is a kind of Trading Strategy which refers to opening and closing a trade within the same day. These Traders often focus on the 15 minute and 1 hour timeframes to take advantage of intraday moves within the markets. This Trading Strategy is used most often by those trading the Forex Markets as it benefits from markets with large daily transactional volumes. Day Traders can also use News, Economic releases and Markets Psychology to their advantage when taking technical analysis into account. Day Trading Strategies can benefit largely from Intraday moves which can show as just a wick on the Daily or Weekly charts.