There are many trading strategies and techniques
that traders apply to create a profitable trading experience.
that traders apply to create a profitable trading experience.
It does not matter if you are a beginner or an experienced trader; there is always a moment you have to decide on the trading strategy you will go ahead. There are many types which differ from the time that they need to be used and of profit margins they seek. Some ask for large profits from long- term positions and others are happy with small profits from short- term positions.
However, they have some things in common, for example, each gives you the option of going both long or short, which enables you to profit from both rising and falling markets.
However, they have some things in common, for example, each gives you the option of going both long or short, which enables you to profit from both rising and falling markets.
A Successful trader follows these qualities:
- Capital management abilitiesYou should have a considerable amount of capital is disposal with a predefined risk/reward ratio. It is recommended to keep the trade size reasonably low.1
- Knowledge over marketsA day trader should keep both eyes in fundamental analysis and technical stuff as well. Only the combination of both analyses would bring a good result. It is vital for a day trader to have as much knowledge as possible over the markets2
- Having a good strategyEven if you choose a day strategy, it is important to adopt your strategies with your current situation. A successful day trader must come up with a new strategy almost every other day, or at least adopt their current strategy to the new ma3
- Self disciplineSuccess without discipline cannot be achieved. It is very important you to monitor prices for wide periods of time without making any decisions. It needs lots of discipline. Just think that, if you rush on your decisions and after you see the market moving in opposite direction with your decision, it hurts! So, it is better to waste an opportunity, than to guarantee a loss.4
Main trading strategies
Daily trading
If you choose the Day Trading strategy, you will trade during a day and close all of your opened positions before the markets close for the evening. So, you are avoiding the risks and added costs associated with keeping a position open overnight.
A day trader usually opens a large number of position with a small amount of investment in each of them. In order to be successful, they must pay close attention to market news and continuously make the analysis. As you understand, a day trader will try to generate quick profits from small price movements, this is a trading strategy suitable for full-time traders, who have the time to pay attention to the market consistently.
A day trader usually opens a large number of position with a small amount of investment in each of them. In order to be successful, they must pay close attention to market news and continuously make the analysis. As you understand, a day trader will try to generate quick profits from small price movements, this is a trading strategy suitable for full-time traders, who have the time to pay attention to the market consistently.
Positional trading
If you choose Position Trading strategy you will holding onto an asset or maintaining a position for a long period of time. This can be anywhere from weeks, months or even years. Now, easy to understand, position trading is not a day or short-term strategy, it stands for long-term investments. Position traders are unconcerned with market fluctuations, and will generally ignore short-term slumps in the hope of capitalizing once the market recovers.
Position traders will make far fewer trades than day traders, but their trades will tend to be of higher value and are held for a longer period of time. While this increases the potential for profit, it also increases the trader’s exposure to risk.
Position traders will make far fewer trades than day traders, but their trades will tend to be of higher value and are held for a longer period of time. While this increases the potential for profit, it also increases the trader’s exposure to risk.
Swing trading
If you choose the Swing Trading strategy, you will use a mixture of technical and fundamental analysis to notice ‘swings’ in an asset’s price movements. A ‘swing high’ is when the price of an asset swing upwards, and a ‘swing low’ is when it moves downward. As opposed to the two previously mentioned trading strategies, swing trading does not have a fixed time scale but is generally used by traders in a two-day to a weekly timeframe.
The main goal of swing trading is to spot a trend and then capitalize on the swing lows as periods of buying, and the swing highs as periods of selling. Swing traders often search for markets with a high degree of volatility as these are the markets in which swings are most likely to happen.
The main goal of swing trading is to spot a trend and then capitalize on the swing lows as periods of buying, and the swing highs as periods of selling. Swing traders often search for markets with a high degree of volatility as these are the markets in which swings are most likely to happen.
Scalping
If you choose Scalping strategy you will open and hold a position for a very short amount of time – generally a few minutes but sometimes just a few seconds. Traders who use a scalping strategy are known as scalpers. Unlike swing traders, scalpers tend to avoid markets that are moving spontaneously and in an unpredictable trend. They require market volatility, but only so long as that volatility moves the market in a way that is consistent with its previous patterns. Adding to this, since the amount of profit per trade is often quite small, scalpers normally look to trade in high liquidity markets.
