Trading Strategies & Decisions
August 18, 2023
In successful trading, there are two things that are important for investors. First efficient money management, and second, trading strategies. With a sound trading strategy, you can come up with the best trading decisions and high-end outcomes.
At present, there are various trading strategies in the market. However, your strategy type depends on the one that can give you consistent profitability. It should stimulate a plan that can keep you on track with your trading journey and take you to the final destination. For in-depth plan formulation, invest in the income report from Australian Stock Report.
Note: Before you learn about trading strategies, we recommend learning the basics of the stock market and forex. Understand the stock vs forex review to know the difference between the two.
In this article, we will dive deeper into some of the top trading strategies:
Trend trading is a type of trading strategy that includes multiple marketing indicators to recognize an asset’s momentum in a particular direction. The trend usually signifies the price of the asset moving in an upward, downward, or sideways direction. An investor can analyze the direction of the trend to come up with the best financial decisions.
If the price is going upward, you, as a trader, can hold the long position and see an increase in asset value. Meanwhile, if you see a downward trend, you can short-sell the asset.
In the sideways trend, there are no lower or higher points. So, unless there are short-term price movements, traders don’t notice any gains.
Range trading is another trading strategy in which you, as a trader, come up with a range for buying and selling financial instruments in a short period.
Let’s say you are targeting a stock, and it’s currently trading at $45. You then forecast that the range will go up to $50 in the upcoming weeks. So, you range between $45-50. This is called range trading. If, at any point, you think that the stock can go higher than $50, you can simply sell it.
The term breakout means when the price goes beyond the level of its range. You can easily identify it by looking at the market and checking whether it’s moving as per the trending bias. If it’s not, then the breakout has happened.
Breakout trading requires the trader to enter/exit the intraday market fast. Here, you enter the trade from the apex, where the breakout might happen. In this strategy, you need to act quickly, aggressively, and in high volumes. As the outcomes are obvious, you don’t have to wait to check if it’ll work or not.
A reversal trading strategy means when the trading position is against the marketing trends. This means if the price was going up earlier, it’s going down now or vice versa.
Whenever you, as a trader, see that any reversal is underway, you instantly get out of the positions. Note that reversals are generally for large price changes. If there is a small modification, then it’s called pullback.
A gap occurs when the price of a financial instrument goes up or down, and there is no trading in between. It is a simple approach where you look for a stock that’s close to the price gap of the previous close.
As a trader, you notice the trading of a financial instrument during the first hour to come up with a trading range. If the price goes above the trading range, you buy it, if not, then you sell it.
Pairs trading is where a pair of stock/financial instruments are traded in a market-neutral strategy. In this case, usually, both stocks trend at a particular mean price.
But when there is any deviation, you, as a trader, can use it as an opportunity and go long on one financial instrument and short on another. Before trying pairs trading, you must know about the best stocks to buy now in the industry. That’ll help you to use this trading strategy efficiently and get the best returns.
Arbitrage: In the Arbitrage trading strategy, you can buy/sell similar assets in multiple markets and get the profit as per the price differences.
Momentum Trading: In Momentum trading, you can buy any asset/financial instrument that has shown a good improvement in price or volume. However, once it starts showing a decline, you sell it.
So, these were some of the trading strategies and decisions in the industry.