Last Updated on May 21, 2021 by MoneyVisual
Good stock trading strategies include some rules that you have to follow when you trade:
- What knowledge about trading you have to adopt
- When and where your exit point is
- How much the risk you are prepared to
- Where do you want your stop loss to place
Stock trading strategies appear in a lot of variations. Some stock trading strategies are very simple but other stock trading strategies are very complex. They can require excellent knowledge of computing.
If you are new in the market, you have to know that one of the main rules is K.I.S.S.rule: Keep it simple stupid.
Some of the most successful traders implement uncomplicated stock trading strategies. When you have a nice return there is no need to complicate your stock trading strategies.
Picking the Right Stock Trading Strategies
This is a very important step you have to take being a novice trader.
You may find yourself confused while trying to find the stock strategies that suit you the best.
That is a reasonable decision because you don’t know what works until you try it.
You have to make a wise decision. Probably you will need to test various to find which are working for you.
Your goal has to be to finally adopt a particular strategy while examining other stock trading strategies. Don’t be afraid to try and try again. That’s the point. You have to find the right trading strategy and stick with it.
But be prepared to spend some time on it.
Some stock trading strategies may perform super in some situations, but on the other circumstances, they may perform poorly.
For example, trading breakouts are beneficial when plenty of stocks are performing breakouts.
But when the market is not volatile, your right decision may be to choose scalps and swings.
This an example of how your trading success can depend on choosing the right trading strategies for different market conditions.
You see how important it is to pick the right strategy. So let’s take a deep dive into different stock trading strategies.
Day Trading Strategy
Day trading strategy is when a trader buys and sells the same amount of the same stock on one day. And make a profit from that.
A day trader as a market participant who makes a complete roundtrip trade during a single trading day.
If your goal is to gain on small price changes, day trading strategies are the right choice for you. Moreover, day trading strategies are crucial for that.
But, your chosen strategy has to be constant and productive. It has to depend on technical analysis, you have to use indicators, patterns, and charts in order to prognosticate price changes.
The positions in the day trading are held for seconds to hours in one day. The main point is that they must be closed before the market close. That’s because you would like to avoid risk exposure that can occur overnight.
Opening a position and then exiting the same position within one day is the so-called round trip.
However, there’s a disadvantage to day trading: your trading position must be closed by the end of the day. Remember this!
Day trading is a short-term kind of trading. So, there is no risk that something can happen overnight and cause a big loss.
Also, you have to be prepared for very intense changes in day trading.
Day trading strategy requires patience, so be a patient trader.
Swing trading is the art of gaining from securities’ short-term price changes. The swing trader holds a few days to two months.
Swing traders wait for low-risk opportunities and attempt to take the lion’s share of a significant move up or down. When the overall market is performing high, they go long, meaning they buy.
When the overall market is weak, they go short more often than they buy. If the market hasn’t many movements, they sit quietly on the trades.
Swing trading isn’t going to lead to overnight wealth.
Anyone who tells you different is either lying or has made an incredibly risky trade that turned out positive by accident. In that way, you can go to the casino and place your bet waiting for bingo. Is that a plan? Of course not.
There is the overnight risk too.
But alike to day traders, swing traders rely on chart patterns and technical indicators. It is important to define the time of entries and exits. The aim of swing trading is to benefit from short moves on the long side (meaning buying) and short side (meaning selling) of the stock.
Swing trading differs from long-term investors, too. Long-term investors may hold security for several weeks or months. Swing traders act differently. When a stock price is performing inadequately, swing traders exit first. Quick and careful chose potential opportunities.
Position trading is another among the stock trading strategies. It can be a good choice for traders who don’t like to spend a lot of time in the markets.
Position traders will hold stocks longer, from weeks to years.
A position trader tries to take benefit of major price moves in a stock. When stocks are performing huge movements, holding on longer-term can be beneficial.
But longer-term positions can be frustrating too.
Forex Trading Strategy
Having discipline is a key feature of trading. So, how to provide that discipline when you are in a trade?
The best way is to have a trading strategy.
If it is already tested, you can be certain that you are implementing some of the prosperous Forex trading strategies. That will make it simpler to make the rules of your strategy. Also, it will help you to keep your discipline.
The best Forex trading strategies are accommodated to the individual. This means you have to study your personality and find the best Forex trading strategies that suit you.
You don’t need to follow all the most prosperous traders. Some of the forex trading strategies may perform very correctly for someone else but for you, it can be a failure.
Forex Trading News
You have to find which news cases are worthy of trading. The smart choice is to know that before you take a look at trading strategies for trading news events.
Forex trading news may boost volatility in the short time frame, you have to know that. You are smart and you want to trade news that has the best forex potential.
What kind of news you have to observe?
The scale is large. You should read the inflation reports and central bank reports. Also, you should read news about wars, disasters, and elections, of course.
Also, keep an eye on changes in the stock market more than everything.
The news can raise volatility in the forex market. And we assume you would like to trade currencies that are liquid. Right?
If you trade the liquid currency pairs, your orders will be executed easily.
Forex Day Trading Strategy
Now we know which news events and currency pairs to trade. But what is the best approach to trading the news?
The babypips.com suggests two main ways to trade the news:
a) Having a Directional Bias
”When looking for a trade opportunity in a certain direction, it is good to know what it is about news reports that will cause the market to move,” explains babypips.com
Before a news report is published, you can find an analyst’s forecast on what numbers will be released.
After the news is published, that number is the actual number.
Here we come to another trading rule: “Buy the rumors, sell on the news.”
b) Having a Non-Directional Bias
According to babypips.com, a more common news trading strategy is the non-directional bias approach.
This method simply plays on the fact that a big news report will create a big move.
It doesn’t matter which way the forex market moves. Traders just want to be there when it does!
You don’t have any bias as to whether the price will go up or down, hence the name non-directional bias. The core rule of the right strategy is to keep trading simple. The Forex trading strategies or stock trading strategies that work best are simple.