Trader Leader

Which trading strategy is the best?

There is no one-size-fits-all strategy, but there a few basic notions that can improve your trading

Traders have many strategies available for optimizing their outcome in financial markets. Although there is no one-size-fits-all strategy, there are a few popular means to improve your performance. Nevertheless, the best strategy is the one that works for you personally, so it is important to test different strategies and analyze their outcomes by yourself!

The best way to do that is by checking how consistent are your positive returns when using a specific strategy. If, after analyzing your outcomes, you realize that you are not doing very well, then it is time to reassess if the strategy you are using is the right one for you.

When choosing their optimal strategy, traders may want to look at several factors before starting. The first factor to be considered is which instrument you are using. Since stocks, ETFs, Forex and Cryptocurrencies behave very differently, even a trading strategy that does very well in one instrument might fail in others.

Choosing your preferred timeframe is also quite important. Since different types of trade require different analysis, having the right timeframe is a key aspect of a successful trade.

Lastly, it is important to have a trading strategy that fits your style. You are more likely to succeed by using indicators you already know, but if they are not helping, it is worth reading more and trying something new.

This article might help you choose a new strategy by indicating the main types of trading, which are common all around the world. This is certainly a good starting point for choosing a new, working strategy.

Value Investing Strategy

A strategy that is commonly used with stocks, value investing implies that the trader first has to find the discrepancy between the market and the intrinsic (real) value of a particular stock. In order to do this, he will go through earnings reports and key financial metrics. If the intrinsic value is higher than the market one, it is wise to buy the stock. Conversely, if the company is traded at a price that is higher than its intrinsic value, it can be expected to go down (the time when this will happen, however, is not set).

Day Trading or Intraday Trading Strategy

Day trading, or Intraday trading, is basically when you open and close all your positions in the same day, and is quite popular among Forex traders. Currency pairs can be quite volatile during the say, and by using leverage, traders can earn large sums within small price movements. However, Forex is not the only instrument suitable for day trading. Cryptocurrencies can also be traded with the same strategy. One thing that is absolutely required for day trading is high volatility, as it is impossible to trade when the market is flat.

News Trading Strategy

Political and economic news have the potential to affect the asset prices and move the entire markets. Here are two examples to illustrate how powerful news trading can be. On the Forex market, traders buy and sell national currencies in pairs. Their exchange rate is a good proxy for the well-being of the respective national economy. When the American economy flourishes, so does the USD, and vice versa. When the US economy is in crisis, the USD will also depreciate. Of course, it is more complicated than that, but the general idea is roughly like this.

Forex is not the only market that is affected by the news. The equity market, where corporate stocks are traded, is another example. Corporate news, like an appointment of a new CEO or a new sales milestone, can make the company move up or down. People, interested in stocks trading, have to follow corporate news and evaluate the overall business climate in order to make well-rounded decisions.

Swing Trading Strategy

When using this strategy, traders can earn by capitalizing on sudden price swings during a certain period. This is where this strategy gets its name from. Sudden price movements are very common in many markets and can affect the most diverse range of assets. One way to apply the swing strategy is to find a strong trend and wait for a retracement. This is, basically, a short-term move in the opposite direction, but which does not change the direction of the bigger trend.

When this happens, the asset price will depreciate, but since it is not an actual trend reversal, the price is expected to go up again. You can call this a version of the old “Buy low, sell high” tactic.

Scalping Strategy

Scalping is a subtype of the day trading strategy. As in day trading, all deals are being opened and closed within the same day. Yet, the number of deals and their duration will vary significantly. When applying the classic day trading strategy, you can open as little as one deal and it will still classify as day trading. In scalping, things are a little bit different. Traders open a big number of deals, stacking up small gains over time. In scalping deals can be as short as a few seconds. All in all, it is an interesting strategy that a lot of traders, especially on the Forex market, find useful.
These are 5 of the most common strategies that you can use in your trading, and teach your community as well!

You are not limited to these basics, though. There is always room for improvement, and you should seek to learn how to improve your trading by other means, such as using indicators and learning how to use different types of charts to your benefit.

Nonetheless, we all have to start somewhere, and this article might be helpful for new traders. Go ahead and test all of these strategies, so you can know which one is the most comfortable for you.