A trading strategy is something without which work on the exchange is impossible. Without a trading strategy, trading turns into a game of chance for adrenaline, not profit. Therefore, the importance of a trading strategy cannot be overstated.
Trading Strategy is a complete trader’s guide.
The purpose of the strategy – to provide a profit on the stock exchange.
A trading strategy is usually based on:
- the rules of market analysis (fundamental and / or technical analysis) and the search for opportunities
- the rules for entering a position with a favorable forecast
- rules for holding a position
- rules for exiting a position
- risk management
- rules for working on bugs
Any trading strategy must be consistent with the trader’s personal qualities and discipline, namely:
- how he analyzes the information coming from the market and assesses its nature, how he creates a forecast based on actual data
- whether he is inclined to hold profits and cut losses
If we turn to the classification of trading strategies, that is, universal strategies, as well as specialized ones – separate strategies for the bond market, stocks, currency pairs, futures, indices, etc.
By the time of holding a position, trading strategies are divided into:
In general, strategies can be divided into:
Any trending strategy is based on the assumption that the price has more chances to continue the directional movement – up or down – than to reverse it. A trend is the direction of price movement, taking into account which the trade is conducted. In an uptrend, deals are opened mainly in longs, in a downtrend – in shorts.
An uptrend is considered to continue as long as each new low and high of the price is higher than the previous values.
In a downtrend, subsequent price lows and highs should be lower than the previous ones.
The counter-trend strategy is based on the principle of corrective movements when the price reaches new lows or highs.
Unlike trending strategies, counter-trending strategies usually use more different indicators that indicate that a financial asset is overbought or oversold.
After a period of movement along the trend up or down, there comes a moment when the momentum is exhausted, the price slows down progress and enters a correction phase. This moment is used to open a position against the main movement.
A flat strategy is used in a market in which the price tends to hold within a range. In this case, there may be spikes when the price breaks through the boundaries formed by the flat, but then returns to the existing range again.
A flat trading strategy prescribes to open positions from the lower and upper borders of the flat with the aim of moving to the opposite border of the flat.
In even more detail and in depth, you will be able to reveal, form and apply the most optimal trading strategy together with our team of analysts.